Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

NEW WRIT

For Hamilton, in the room of Alexander Wilson, Esquire, deceased.—[Mr. Michael Cocks.]

PRIVATE BUSINESS

ORKNEY ISLANDS COUNCIL ORDER CONFIRMATION BILL

Read the Third time and passed.

Oral Answers to Questions — ENVIRONMENT

Local Authority Land

Mr. Peter Bottomley: asked the Secretary of State for the Environment if he will require local authorities to publish registers of their land holdings.

Mr. Macfarlane: asked the Secretary of State for the Environment what discussions he has had with the local authorities regarding the problem of waste land.

The Secretary of State for the Environment (Mr. Peter Shore): I do not intend at the present time to compel local authorities to publish registers of all their land holdings. My immediate aim is to concentrate efforts to identify and secure early development of unused land in those areas where the problem of derelict and waste land is most serious, particularly in the inner cities. To this end I have written to the chairmen of the main nationalised industries and statutory undertakers, and have asked local authorities in partnership and programme areas to bring forward proposals to bring derelict and waste land into use. The powers contained in the Inner Urban Areas Bill and the extension of the derelict land clearance areas announced yesterday will be a considerable help.

Mr. Bottomley: Is the Secretary of State aware that his reply is encouraging in so far as it helps to put pressure on the statutory undertakers and local authorities? Will he continue to encourage them to publish land registers not only with a note of the planned use for the land but with a date when it is expected to come into development? Does the right hon. Gentleman agree that public pressure on the authorities concerned will help to get this land into use, creating jobs and industry and eliminating dereliction and eyesores which exist at the moment?

Mr. Shore: It will encourage local authorities, where they think it appropriate, to make known as much information as possible about their holdings of unused land. I frequently talk to the local authority associations. I can say that I have


come under no pressure from them to make this a priority at present.

Mr. Frank Allaun: Is not the problem very different from the one posed by the hon. Member for Woolwich, West (Mr. Bottomley)? Is it not a fact that many councils which desperately need land for housing and other purposes cannot buy it—I am thinking of disused docks and other land which may not have been used for 20 years or more—because the district valuer is placing an industrial site value upon it? Will he therefore permit local authorities to acquire the land at its current use value, which may be nil or very little, since that was the original Labour Party proposal on land acquisition four years ago?

Mr. Shore: Local authorities have wide powers for acquiring land, and the compensation which they pay for it is laid down by statute. It varies according to the categories of land and buildings that they are acquiring. I agree that in some areas of the country and some inner city areas the shortage of land is still a major problem. Equally, there are other areas of the inner cities where the problem now is to make effective use of land for which no proper purposes can yet be found.

Mr. Durant: Does the Minister agree that this is public land and that therefore the public has some right to know who owns it and where it is?

Mr. Shore: Yes. The truth is that in a number of the areas with which we are most concerned the existence of such unused land is self-evident. The main problem and purpose is to find uses for it. I am strongly encouraging the local authorities, particularly in inner city areas, to pay attention to the matter now.

Mr. Lee: Does the Minister agree that while a register is necessary, everything possible should be done to encourage local authorities to amass vast quantities of land, as did the city of Birmingham at one time, years ago? Does he also agree that everything possible should be done discourage them from selling off their portions as, alas, the city of Birmingham did under Conservative management in recent years?

Mr. Shore: Local authorities have to take a serious long-term view of their

land holdings and land needs. In a number of cases, against a forecast of housing and other need, it is sensible for local authorities to be accumulating land and not disposing of it. In other areas the conditions are different.

Mr. Heseltine: Cannot the Secretary of State understand that local authorities have been taking a serious and long-term view of their responsibilities for many years? What is needed is a new approach whereby parcels of land are put up for sale at public auction in order to give people the opportunity to develop with private money the facilities that are needed in the inner cities.
Would not it be a gesture of enthusiasm for his partnership schemes if he were to suggest that there should be pilot disposals of land in inner city centres, of the sort that we have seen in Liverpool recently, so that there can be something to show for all the conversations that are taking place?

Mr. Shore: I think that the hon. Gentleman is on a different point. Local councils take a long-term view of their responsibilities. However, the hon. Gentleman should be aware of how greatly circumstances have changed in a number of our major cities, and the earlier assumptions have now to be seriously revised.
I am much in favour of testing the market price of land. I hope that local authorities and private owners of land will not be obsessed by the historic cost of the land that they bought but will realistically test what the market value is.

Agricultural Land (Development)

Mr. Peter Mills: asked the Secretary of State for the Environment what advice he gives to city councils in connection with the need to consult the relevant district council before purchasing agricultural land for development in the areas of the latter.

The Under-Secretary of State for the Environment (Mr. Guy Barnett): My right hon. Friend and his predecessors have stressed the importance of constructive working arrangements between local authorities.

Mr. Mills: Does the Minister realise the serious position that has developed between South Hams District


Council and Plymouth City Council, namely, that the city council has bought land for building without consultation with the district council? Is not this nonsense, and will the Minister do something about it? We in the South Hams district are not prepared to see good agricultural land of grade 2 quality being used for building.

Mr. Barnett: I am aware of the purchase of the land, but I have no knowledge of the circumstances. Any proposals for development of the land in question will need planning permission from the authority in whose area the land is situated.

Mr. Hicks: Does the Minister acknowledge that the relationship between a large urban authority and the surrounding rural ones will always be sensitive? Does not the House have a responsibility to protect those rural authorities against possible take-overs and other such threats that occur from time to time in these circumstances?

Mr. Barnett: I agree with the hon. Gentleman. I have already said that our advice to local authorities is that constructive working arrangements ought to exist. It would not be right for me to make a comment on this case because I do not know the details of it. However, I take the point made by the hon. Member for Devon. West (Mr. Mills) when he draws attention to the problem of agricultural land. In circular 75/76 local authorities are advised to ensure that land of a higher agricultural quality is not taken for development when land of a lower quality is available.

Mr. Ronald Atkins: I recognise that housing and other development must be given a certain priority, but is it not alarming that since the Second World War we have been losing about 50,000 acres of farming land a year? This is unfortunate when there is still so much derelict and waste land which could be used.

Mr. Barnett: My hon. Friend is quite right to draw attention to that point. In addition to the circular, I should mention that any proposal for development of 10 acres or more of agricultural land which is not in accordance with the approved development plans is referred to my right hon. Friend the Minister of Agriculture, Fisheries and Food for his observations.

Mr. Alan Clark: No one would want the Minister to mediate between the city of Plymouth and South Hams District Council on this occasion, but to use language such as my hon. Friend the Member for Bodmin (Mr. Hicks) has used about protecting the inhabitants of these rural areas from the encroachment of the cities is going too far. Does not the Minister agree that if the people of Plymouth are to be decently housed, clearly there will have to be expansion outside the city limits?

Mr. Barnett: It would be wrong for me to make any comment on either local authority. It would be wrong for me to express any opinion on whatever proposal may be made, as it could be the subject of an appeal. I repeat that a local authority can purchase land in the area of another local authority, but development is dependent upon permission being granted by the local authority in whose area the land is situated.

Building Land

Mr. Tim Renton: asked the Secretary of State for the Environment what acreage of building land was released in 1977, and what is his estimate of the amount to be released in 1978 by local authorities in England from acquisitions made as a result of the Community Land Act.

Mr. Guy Barnett: A firm figure for 1977–78 is not yet available. It is not practicable to form a realistic estimate for 1978–79.

Mr. Renton: Is it not a fact that only 33 acres were released for housing in 1976–77, whereas in that year local authorities' administrative and staffing costs charged to the community land account amounted to £3,500,000? This works out at over £100,000 per acre released. Is not that the most appalling waste of ratepayers' money in pursuit of doctrinal Socialist aims?

Mr. Barnett: No. If the hon. Gentleman had any knowledge of running a large scheme or undertaking he would recognise that in order to operate it costs of the kind that he has described would have to be incurred at the start, in the expectation of the growth of the scheme later.

Mr. Hardy: Cannot my hon. Friend detect an element of ambiguity in the


fact that some Conservative Members ardently echo the very proper demand that countryside land should be retained and the next moment appear to be demanding that the same land should be developed as rapidly as possible?

Mr. Barnett: There could be ambiguity. In the constituency of the hon. Member for Mid-Sussex (Mr. Renton) there may be a shortage of land. I was interested to learn that the council of that authority is considering the possibility of the acquisition of land for housing under the community land scheme.

Mr. Stephen Ross: In this area, does the Minister notice the comparative success of the Welsh Land Board? Does he think that there is an example there that could be applied to England? Could not he amend the Community Land Act to let it apply in a regional context? He might achieve more success in that way.

Mr. Barnett: No, I think that it was quite right, in the English context, to use the local authorities as the instruments for the Community Land Act and to set up the land acquisition and management schemes which ensured co-operation between the two levels of local government. That was right in view of the English local authorities' responsibilities for structure and local planning.

Chipping Sodbury (Quarry)

Mr. Cope: asked the Secretary of State for the Environment when he expects to announce his decision on the proposal to fill Chipping Sodbury quarry with rubbish.

The Minister of State, Department of the Environment (Mr. Denis Howell): I hope to be able to announce a decision in about a month's time.

Mr. Cope: Does the Minister realise that there is much more than local interest in this proposal? It involves his making a judgment on whether methods and safeguards for tipping have advanced sufficiently to put a monster tip, such as the one proposed, near a conservation area and an area of outstanding natural beauty.

Mr. Howell: This matter requires the judgment of Solomon, and I am quite capable of exercising it.

Dr. McDonald: Will my right hon. Friend state what the Government's plans are to deal with Thurrock's serious problems of abandoned quarries, in view of the Government's amazing refusal of derelict land clearance area status to Thurrock?

Mr. Speaker: Order. I have allowed the hon. Lady to ask her supplementary question, but if she wants to ask about Thurrock she ought to put down a separate Question.

Council House Sales

Mr. Knox: asked the Secretary of State for the Environment whether he has any plans to announce measures to increase the opportunities for sitting tenants to buy their council houses.

Mr. Shersby: asked the Secretary of State for the Environment if he will permit local authorities to increase the present rate of discount permitted on the sale of council houses to their tenants to 30 per cent.

Mr. Shore: No, Sir.

Mr. Knox: As there has been a substantial reduction in the number of council houses sold to sitting tenants since the Government came to power, why will the right hon. Gentleman not make it easier for tenants to buy their houses? Why do the Government adopt such a doctrinaire attitude on this matter?

Mr. Shore: It is not the Government but the Opposition who take a doctrinaire attitude on this matter. There is still a marked shortage of rented accommodation. Some areas are worse than others. Where that shortage exists, it will not be my practice to encourage the sale of council houses. Council tenants who wish to become owner-occupiers are able to do so in other sorts of housing, are encouraged to do so, and have been doing so at the rate of about 40,000 a year since we came into office.

Mr. Newens: Is it not a fact that the sale of council houses to sitting tenants must inevitably reduce the number of tenancies available to help those on waiting lists? Will my right hon. Friend make clear that the Government are prepared to help owner-occupiers in other ways


but regard it as a priority also to help those who need houses to rent?

Mr. Shore: We have made that very clear. I have made it clear, as did my predecessor from almost the first day he took office in the circular that he issued at that time. We are convinced that where there is a shortage of rented accommodation, local councils should be encouraged to make provision for rented housing. One does not make provision by selling off what one has.

Mr. Heseltine: Does the Secretary of State not understand that when, as is often the case, people have been living in the same council house for decades, it does not make the slightest difference to the supply of housing to give them the right to buy their property? We accept the charge that he flings at us. We are committed to the view that council tenants and new town tenants should have the right to own their own homes, and in the next election campaign we shall tell them that we shall give it to them.

Mr. Shore: I know the hon. Gentleman's view, but in my judgment, if local authorities are to be given responsibility for looking after the housing needs of their areas, it is right for them to exercise their judgment. I do not accept that they would be able to do that if a blanket right of purchase, regardless of circumstances, were conferred on all tenants by legislation. In addition, the sort of local authority accommodation that would be the first to go would be those estates with gardens, which, for social reasons, are in short supply and for which there is very great need.

Mr. Stan Crowther: Can my right hon. Friend recall hearing the Conservative Party propose that private landlords should be required to sell their houses to sitting tenants? If the Conservative Party is so keen on allowing tenants to buy their houses, would it not be a good idea for it to persuade its friends, the private landlords, to sell their homes?

Mr. James Lamond: And at a substantial discount.

Mr. Shore: The House will have noted the typically undoctrinaire contribution of my hon. Friend the Member for Rotherham (Mr. Crowther) in extend-

ing parity between tenants, whether private or council—as distinct from the prejudiced and one-sided view that we get from Conservative Members.

Housing Development (Planning Consent)

Mr. Newton: asked the Secretary of State for the Environment if he is satisfied with arrangements for ensuring adequate hospital and other public services in connection with the granting of planning consent for major housing developments.

Mr. Guy Barnett: Yes, but the adequacy of hospital facilities is not normally significant in deciding individual planning applications. Local planning authorities are advised by DOE circular 102/72 to have regard to the adequacy of services and community facilities when considering major proposals for housing development.

Mr. Newton: Does the Minister accept that to the people of Essex and, I should think, Kent that answer will appear to be extremely complacent and that there are no signs that these planning requirements have been tied together? Is he aware that in my constituency and others nearby there has been a huge increase in population with no additional hospital provision? Does he recognise that this has occurred, and will he take steps to get something done about it?

Mr. Barnett: If the hon. Gentleman is referring to expansion at Braintree and Witham, this was planned expansion, which the area health authority could be expected to take into account in its plans. I understand that a major hospital development is planned at Broomfield, north of Chelmsford.

Mr. Loyden: Is my hon. Friend aware that when new hospitals are being built in city centres away from the communities that have been moving to the outskirts, services for those communities are becoming over-stretched? Does he agree that there is a need to establish community centres and health centres in those areas, so that confidence can be restored to people living a long way from health centres that, as in Liverpool, have been built in city centres?

Mr. Barnett: I accept a good deal of what my hon. Friend says, but my responsibility relates to the desirability of hospital facilities being taken into account in planning applications. The question of the location of hospitals is one for my right hon. Friend the Secretary of State for Social Services.

Partnership Committees

Mr. Arnold: asked the Secretary of State for the Environment whether he is satisfied with the operation of the partnership committees.

Mr. Shore: The first partnership committee meeting took place only last October, and since then all the partnerships have made progress towards tackling the problems of their areas.

Mr. Arnold: Is it really necessary to have a combination of partnership and programme authorities and designated districts? Would it not make better sense to give additional powers to the local authorities with inner urban area problems and to allocate money in response to properly prepared schemes?

Mr. Shore: The whole inner city programme is based upon the attempt by the Government to differentiate between those areas with absolutely major problems and those with problems that, though great, are not of the same order of magnitude. We cannot concentrate on everything at the same time, but, in terms of resources, we have put special efforts into the seven major partnership areas where the inner city problems are at their worst.

Mr. Litterick: Is the Secretary of State aware that the people of Selly Oak have informed me that they are not satisfied with the operation of the existing partnership agreement in Birmingham, for three reasons—first, because Selly Oak is not included in the partnership agreement; secondly, because my constituents feel, on the evidence, that they are not being adequately consulted by the existing partnership committee; and, thirdly, because they fear that, as a result, Selly Oak will not get its fair share of the resources that are devoted to the city of Birmingham?

Mr. Shore: I note what my hon. Friend says and I shall see that my right hon. Friend the Minister for Housing and Construction, who is chairman of the partner-

committee, takes note of it. The first job of all the partnership committees was to define the areas of the partnership. If my hon. Friend's area was excluded, I am sure that he will find that there were good reasons for that joint decision.

Mr. Skinner: Not good enough.

Mr. Shore: My hon. Friend the Member for Bolsover (Mr. Skinner) is a great expert on Birmingham, as he is on other matters.

Mr. Skinner: I am an expert on marginal seats.

Mr. Shore: And on safe seats. On the question of consultation raised by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick), we are trying to get all the committees to develop thought-out procedures for consulting the people in the areas concerned.

Mr. Arthur Jones: Does the right hon. Gentleman see partnership agreements as an alternative to development corporations, bearing in mind the difficulty of development corporations perhaps not being acceptable to local authorities? Does he see a more appropriate relationship between central and local government, through partnership committees, than we have had hitherto?

Mr. Shore: To some extent, yes. The circumstances in the already settled and built-up local authority areas are very different from those in the green field site areas. Not all new towns are wholly green field areas, but in the inner city areas where there is strongly established local government already and a substantial community living there, something other than the new town type of corporation is needed. The partnership committee brings local government and central Government together in a way that no other device has succeeded in doing.

Water Charges

Mr. Silvester: asked the Secretary of State for the Environment what representations he has received, if any, concerning the introduction of separate water charges.

Mr. Denis Howell: A large number of representations have been received relating to the extension of direct billing of consumers by some water authorities


this year. However, many of these representations have arisen because it has not been understood that such bills now include charges for sewerage and environmental services, which were in previous years collected by local authorities with their rate demands.
Other representations arose because it had not been realised that the sewerage and environmental service charges have never qualified for rate rebates and that therefore the new arrangements for payment do not represent any change in this situation.

Mr. Silvester: Is it not the case that these combined water and sewerage charges represent a substantial part of the household budget? Will the Minister give urgent attention to the question of finding the most economical way of relating water charges to actual household consumption?

Mr. Howell: If that is a proposal to introduce metering charges for domestic water, I am totally opposed to it. It would be a great burden on the poorer sections of society, and the cost of installing the meters and of providing meter readers would add considerably to water bills.

Mr. Stoddart: Is my right hon. Friend aware that he would have had considerable representations from me except that I decided to send those representations to the Thames Water Authority instead, which is the proper and responsible authority for introducing direct billing? Is he aware that this has caused bewilderment and anger among ratepayers who have not understood the water reorganisation? Is there nothing that he can do to help my constituents?

Mr. Howell: I have every sympathy with my hon. Friend's constituents. When this legislation was going through the House we persistently stated that many problems would arise as a result of the 1973 reorganisation. Those problems have now arisen in practice. I have sympathy with my hon. Friend's constituents who do not understand direct billing, but I must point out that my postbag from this House shows that most hon. Members who voted for it do not understand it either.

Mr. Jessel: How much of the increase in water rates has been due to the high rates of interest prevailing in the middle 1970s? Many past loans taken out to aid the construction of reservoirs have now fallen due for repayment and have had to be replaced by new loans at current interest rates.

Mr. Howell: That is an element, but it is not as important as the hon. Member thinks. If he will table a specific Question I shall try to give him an answer.

Mr. David Young: Will my right hon. Friend indicate what steps his Department is prepared to take on behalf of householders who cannot afford to pay their water rates in a lump sum? Will he ensure that the water rates can be paid on an instalment plan in all parts of the country?

Mr. Howell: Yesterday afternoon I met the chairmen of all the water authorities and I raised this matter with them. I am glad to tell the House that I was assured by all of them that they will make arrangements to accept instalments whenever they are required.
I am interested in the experimental scheme in the North-West for the sale of stamps at post offices so that people can use that method of payment if they cannot afford to pay the once-a-year lump sum. I shall continue to discuss these matters with the chairmen and I shall see that instalment plans are accepted in the industry.

Mr. Alison: Is the Minister aware that the domestic water rate in Scotland is not only included in the general rate but is eligible for rate rebate? Since the Government have been legislating for Scotland, will he now legislate for the advantage of England and include the same benefit for the English, if necessary using some of the money from the Scottish Assembly to improve matters in England?

Mr. Howell: It is a great pity that when the hon. Member spoke for and supported the Conservative Government in 1973 he did not arrange to introduce the Scottish situation into England. We are prevented from doing so by the nature of the Act itself.

Housing (Homeless Persons) Act 1977

Miss Fookes: asked the Secretary of State for the Environment if he is satisfied with the working of the Housing (Homeless Persons) Act 1977.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): Although it is less than six months since the Act came into force, it is already apparent that it has been of significant benefit to a great many homeless people. A clearer picture of its effect on the problem of homelessness generally, and of any difficulties which have been found in operating it, will begin to emerge in the coming months, particularly when the statistics for the first four months of operation have been collected and analysed.

Miss Fookes: Would not the problem of homelessness be much reduced if people who owned houses that are much too large for them could be encouraged to take in people, instead of being deterred, as they are now, by the current legislation?

Mr. Armstrong: I do not think that that would make a significant contribution to solving the problem of homelessness. I do not accept that people are deterred in that way because of the legislation.

Miss Joan Lestor: Will my hon. Friend confirm that it was never the intention of the Act to enable an authority to offer homeless people coming into the borough the fare to return home, either within or outside the country? Will he therefore keep a weather eye on what the Tory council in Slough is doing, in order to see that it honours its obligations under the Act?

Mr. Armstrong: I confirm what my hon. Friend said. We have been disturbed by some of the statements that we have read in the Press. There must be no discrimination at all on grounds of nationality or citizenship, once a person arrives in this country properly. I assure my hon. Friend that we shall keep an eye on these matters.

Mr. Evelyn King: Does the Minister accept that however well intentioned this Act was—and it was well intentioned—

it can operate with grave injustice in rural and tourist areas? In these areas the summer population is often enormous and the winter population is very small. Is the hon. Gentleman aware that tourists—who are often young—come into the area, claim to be homeless, and are rehoused, which means that the residents who have been on the list for many years are put at a grave disadvantage? Is he also aware that the authority in question has to bear considerable expense, which is very unfair?

Mr. Armstrong: We are collecting statistics, as the Act has only been in force since 1st December. Over the years the bulk of housing authorities have had to make judgments about urgency cases and people in desperate need. Homelessness is the most acute form of housing need and I hope that it will continue to be handled with sensitivity and humanity.

Mr. Douglas-Mann: Does my hon. Friend agree that there is widespread misunderstanding about the effects of the 1974 Rent Act and of the extent to which it provides substantial security for landlords of occupied property? Will he embark on a publicity programme to encourage the owners of residential property to provide accommodation for letting in their homes, beause this could contribute to the relief of the problems to which the hon. Member for Plymouth, Drake (Miss Fookes) referred?

Mr. Armstrong: I agree that there are some landlords who, because they have misunderstood the effects of the 1974 legislation, have been hesitant. We are doing our best to let them know their rights in these matters.

Mr. Rossi: Does the Minister agree that particular authorities have special problems under the Act—namely, the recipient authorities of people from other boroughs and from overseas? This applies both to the Slough situation and to the tourist areas. Does he further agree that the answer is to make more resources available to those authorities with special problems? Is he not receiving representations to that effect?

Mr. Armstrong: We are analysing the effects of the Act over the first four months. Obviously there are particular authorities that have special problems.


A number of enlightened authorities have, for four years, carried out the spirit of the circular that was issued in 1974. If they approach these matters with humanity they can find reasonable solutions.

Non-metropolitan District Councils

Mr. Grocott: asked the Secretary of State for the Environment what are his criteria for establishing whether a non-metropolitan district council may be considered for increased powers in line with his views on organic change in local government.

Mr. Shore: This is one of many questions that we are discussing with the local authority associations as part of our consideration of the case for organic change. We will report to the House in due course.

Mr. Grocott: Bearing in mind that many of the old county boroughs—by far the best form of local government yet devised—had populations of less than 100,000, will my right hon. Friend not stop simply at the point of giving powers back to the "Big Ten" or even the "Big Forty"? Will he instead extend them to smaller district councils, such as Lichfield District Council and Tamworth Borough Council, in line with the wishes of the Labour Party in the area and those of local inhabitants?

Mr. Shore: I can see my hon. Friend's point. Indeed, I suggested it in a speech that I made some time ago. We must consider very carefully the sensible way to proceed, given the existence of a two-tier system of local government that everybody wishes had never been established. However, given that it exists, we must look carefully at the case for changes and for bringing greater powers and responsibility to the levels nearest to the people concerned.

Mr. Stephen Ross: Will the Minister accept the evidence of a referendum in my constituency, if it can be shown that the overwhelming support of the populace is for a one-tier authority?

Mr. Shore: I shall bear in mind the particular position of the Isle of Wight, which everyone agrees is probably one of the most difficult and anomalous because it is the smallest local authority county

in the country. Nevertheless, I cannot give the hon. Member any assurance about a referendum.

Mr. Ashley: Although my right hon. Friend can see the case and understand the point for the return of powers, he is not acting on his appreciation of the case, and many people in Stoke-on-Trent and other areas have strong feelings about the need for returning these powers. Therefore, can my right hon. Friend say whether it is now a question of "when" or "if" these powers will be returned?

Mr. Shore: I not only understand the strong feelings, I share them. However, the present situation is exactly as it was defined by my right hon. Friend the Prime Minister when he spoke at the Bristol conference. He said that there would be a series of further consultations—first of all bilaterally, with the major Ministries concerned. I myself will co-ordinate these exchanges and we will then consider collectively, as we must, what has to be done.

Building Societies Association

Mr. Michael Latham: asked the Secretary of State for the Environment whether he will make a statement on his latest discussions with the Building Societies Association.

Mr. McCrindle: asked the Secretary of State for the Environment if he plans to meet the chairman of the Building Societies Association in the near future.

Mr. Shore: I last met representatives of the Building Societies Association on 9th March and I informed the House of the outcome in my answer to my hon. Friend the Member for Leeds, West (Mr. Dean) on 10th March.
The Government and the BSA do, of course, have regular discussions in the Joint Advisory Committee on Mortgage Finance.
I am ready to meet the chairman of the association whenever the need arises.

Mr. Latham: As interest rates are now once again moving inexorably up, will the right hon. Gentleman confirm that the building societies would be legally entitled to take any decisions they thought appropriate regarding their own interest rate structure, both for mortgages and for investment?

Mr. Shore: The building societies have the legal right to make adjustments to their mortgage rates, but they take acccunt, as indeed they should, of longer-term, or at least medium-term, interest rate movements and not all the much more frequent and often much stronger movements of the MLR. We are making it easier for them to take a longer-term view by encouraging them to have stabilisation funds.

Mr. McCrindle: Has not the time arrived when the Secretary of State should withdraw his request to the building societies to place restrictions on their mortgage lending to first-time buyers and others? Is it not nonsensical that building societies are pressing upon existing borrowers additional loans for repairs and maintenance while being obliged to refuse mortgages to people who wish to buy houses for the first time?

Mr. Shore: What would be nonsensical would be to allow a flood of building society money to chase up the prices of housing generally and thus make it particularly difficult for first-time purchasers and people of modest means to obtain their houses.

Mr. Joseph Dean: Will my right hon. Friend press the building societies further to make more of their funds available within the red-lined zones in some of the larger cities? There is a grave shortage of funds available for that purpose. If he does not adopt that course, will he consider the alternative of trying to make more funds available for local authorities to advance those loans themselves?

Mr. Shore: On the issue of red-lining, we have had many conversations with building societies and with local authorities, which can play their part. There has been considerable progress in identifying the problems in certain inner city areas. I am at least hopeful that the £300 million which has been lodged by the building societies for support lending—that is to say, for nominees of local authorities—will be much more successful this year than was the earlier scheme of last year.

Mr. Sainsbury: Does the Secretary of State accept that it would be much more helpful to people seeking to buy a home if he were to repeal the Community Land Act and thus increase the supply of land

and of homes for sale, rather than act to restrict the supply of funds to enable people to purchase the homes?

Mr. Shore: That is a frivolous intervention.

Mr. Blenkinsop: Is my right hon. Friend aware that the building societies have now established an appeal procedure to enable some of the cases of possible red-lining to be examined with more care?

Mr. Shore: I am grateful to my hon. Friend for bringing that to the attention of the House, as it is important. I am fully aware that this is an appeal arrangement, as it were, still within the compass of the building societies themselves. Nevertheless, they have agreed to set up an appeal tribunal whose members will include right hon. and hon. Members from both sides of the House. Therefore, there will be a far greater sense of fairness in particular cases than there has been in the past.

Mr. Heseltine: Does the right hon. Gentleman realise that if he really thinks that his reply to my hon. Friend the Member for Hove (Mr. Sainsbury) was accurate, it shows how little he understands the harm that the Community Land Act has done to the whole housing movement? In respect of the conversations that he could have with the building societies, does he understand that until he makes clear his attitude to the building societies' special deposits after the end of June he is injecting uncertainty into the house building programme, and that since house prices have increased by 16 per cent. over the last 12 months, anyway, his proposals have an element of slamming the stable door after the horse has bolted?

Mr. Shore: That is not at all what we intend to do. We have a continuous exchange with the building societies, of course. What I announced in March, in answer to the Question to which I referred earlier, was for the coming quarter, that is to say, for the next three months. Of course we shall look at the situation again. I have no desire to retain any limitations on the building societies' lending programme, any more than they have—just as soon as we are satisfied that we are not feeding inflation in house prices.

Council Houses (Modernisation)

Mr. Ronald Atkins: asked the Secretary of State for the Environment what Government funds were taken up by local authorities last year for the modernisation of council houses.

Mr. Armstrong: The final figures for 1977–78 are not yet available. In the first three quarters of that year it is estimated that expenditure by local authorities in England totalled about £242 million: judged by previous years the final quarter is likely to show a significantly higher rate of expenditure than that of the earlier quarters.

Mr. Atkins: Although those funds are very welcome, is my hon. Friend aware that the wholesale introduction of central heating, sometimes without the tenant's consent, has in a minority of cases certain disadvantages—such as persistent condensation and fungus on walls, inability to pay bills through lack of control, and the lack of choice of alternative fuel?

Mr. Armstrong: That is a very important matter, which has given us some difficulty in different areas. We have set up a working party and published our first bulletin. We are trying to deal with this problem.

Sir Anthony Royle: Is the hon. Gentleman aware that there is increasing concern among residents in council houses alongside the South Circular Road? Will he give immediate consideration to the possibility of providing grants for double glazing, as provided for relief from aircraft noise, for residents in council accommodation alongside this very noisy arterial road?

Mr. Armstrong: The general matter of council housing is one for local authorities and their use of resources. The hon. Gentleman should write to me about any special measures of the kind that he outlines.

Mr. Madden: Does the Minister share my concern about mean councils, such as the Tory-controlled Calderdale council, which modernise properties but then give very little to tenants, including the elderly, to redecorate and carry out consequential repairs? Will he insist on a standard rate for redecoration allowances

for tenants when modernisation takes place against their will, or, indeed, with their agreement?

Mr. Armstrong: The relationship between central Government and local authorities is a difficult matter, but improvement grants leave a great deal of jurisdiction to local authorities. That is in accordance with general policy.

Mr. Rossi: Will the Minister confirm whether percentage approval of local authority-planned expenditure under block 2 of the housing investment programme, which relates to improvements, compares very unfavourably with the percentage approval under block 1? Is this not contrary to the housing strategy laid down in the Government Green Paper?

Mr. Armstrong: I do not think so. We are allowing as much flexibility as we can in respect of transfers within the blocks. We are also expanding the resources to be spent in these blocks next year. I think that the hon. Gentleman will find that local authorities will be able to cope.

Gateshead Community Programme

Sir W. Elliott: asked the Secretary of State for the Environment what is the planned effect and cost of the comprehensive community programme now established in Gateshead; and whether that conflicts in any way with the new Government programmes for Newcastle and the surrounding area.

Mr. Armstrong: The Gateshead comprehensive community programme was planned as a means of securing a co-ordinated approach to the problems of urban deprivation on a district-wide basis. The cost to this Department is some £35,000, a year, which is the cost of funding a small team attached to Gateshead metropolitan borough and working on the CCP. The Newcastle-Gateshead partnership has similar aims but is concerned with the problems of a defined inner area. The two approaches are complementary rather than conflicting.

Sir W. Elliott: I accept that the two programmes are complementary, but does the Minister agree that the Gateshead scheme, although small, is still costing the taxpayer a good deal of money? Have not such schemes been superseded by the partnership arrangement?

Mr. Armstrong: That is not my experience. I have responsibility for both the partnership scheme and the CCP. I am sure the hon. Gentleman agrees that in Gateshead there are pockets of deprivation throughout the district. The work which is being undertaken is assisting the partnership proposals and is complementary to them.

Mr. Speaker: I call Mr. Steen, and I remind the House that the Question relates to Newcastle.

Mr. Steen: Will the Minister explain why he is still spending so much money on research into the problems of inner cities when £100 million of Government money has already been spent on this topic? Is it not about time that he got on with a bit of action?

Mr. Armstrong: I think that the present Government have made considerable progress in getting on with solving the problem of deprivation in the inner cities.

New Town Housing Transfers

Mr. Hal Miller: asked the Secretary of State for the Environment what assistance he is making available to councils to reduce the financial burden of taking over from new town development corporations housing assets built at a high cost and at a time of high interest rates.

Mr. Guy Barnett: Following agreement with the Association of District Councils on the terms of the transitional assistance for the 1978 transfers of new town housing, transfers took place in 10 of the first-generation new towns last month. We hope shortly to put forward proposals for transitional assistance for the transfers in the second-generation new towns which will take fully into account the differences between them and the first-generation towns.

Mr. Miller: Does the Minister accept that the proposal in the case of Redditch involves a burden of £10 million, or £800,000 a year on the rates? Will he accept that there must be a different basis of calculation for the second-generation towns because of the Parker Morris standards of housing and higher interest costs?

Mr. Barnett: I cannot confirm or deny the hon. Gentleman's figures, but I can underline the fact that we shall take into

account in our proposals the differences between first- and second-generation new towns. I recognise that in the case of some second-generation new towns questions of higher costs and higher interest rates may be involved in the construction of houses.

Mr. Newens: Does the Minister recognise that houses which were taken over by new town authorities and which were built 20 or 30 years ago in a period when there were low interest rates and when charges were lower in general are now old and require considerable expenditure on their maintenance? Does he also recognise that new town authorities as a whole believe that more assistance should be made available to smooth the path of the transition whereby new town houses previously managed by development corporations and the Commission have been transferred to local authorities? Does he appreciate that this feeling exists strongly in the older new towns as well as in second-generation new towns?

Mr. Barnett: If there are fundamental design faults or other special problems, my hon. Friend will be aware that Section 10 grant is available to meet such circumstances. I cannot comment on that matter at this stage because the claim forms for Section 10 grant in respect of first-generation new towns are expected only at the end of this month. If the houses are old, presumably the outstanding loan debt is a good deal less. Indeed, the Association of District Councils agreed in the transfer arrangements that housing would be accepted, although some of them might be old.

Mr. Rossi: Does the Minister agree that the terrible debts which these local authorities are being asked to shoulder could be considerably reduced by the Minister allowing local authorities to sell off the houses on generous terms to the sitting tenants?

Mr. Barnett: I do not know what on earth the hon. Gentleman was talking about in the first part of his supplementary question, and I think he will recognise if he examines the matter that our policy in respect of the sale of corporation houses is eminently sensible.

Liverpool Partnership

Mr. Steen: asked the Secretary of State for the Environment how many


committees or working groups have been set up as a consequence of the establishment of the Liverpool partnership arrangements a year ago; how many public officials are involved in total; and how many meetings have taken place to date.

Mr. Shore: The Liverpool partnership is preparing a programme of action to deal with the very serious problems of the inner area. Work on the programme is being processed by six sector working parties and an officers steering group before consideration this summer by the partnership committee of Ministers and members, which I chair. The partnership committee has met twice.

Mr. Steen: Will the right hon. Gentleman explain why he favours only public officials on the partnership committee rather than the many voluntary organisations and the community groups which want to get involved in the decision-making process? Why did the Government vote down the new clause in the Inner Urban Areas Bill which would have given those who live in inner cities the chance to tackle the problem and find solutions themselves?

Mr. Shore: The officials are not members of the partnership committee, as the hon. Gentleman ought to know. Membership relates to elected members of the city council and Merseyside. On the second point, concerning the relationship between the Liverpool partnership and the various voluntary bodies and groups in the city, the kind of arrangement that is thought most suitable in the area has already been laid down. Each of the sector working parties has established special contacts with the range of voluntary bodies in its area of activity.

Mr. Loyden: May I sympathise with my right hon. Friend in trying to understand the comments of the hon. Member for Liverpool, Wavertree (Mr. Steen) on the subject of the inner area partnership? Is my right hon. Friend aware that the Tory Party, at a recent meeting at which he was present, extolled the virtues of inner area partnerships? May I assure my right hon. Friend that the people of Merseyside accept that this will be a contribution to the solution of their problems?

Mr. Shore: I thank my hon. Friend for those comments. I believe that the partnership programme, particularly that in Liverpool, is shaping well. I say no more than that now because these matters must be judged after we have had longer experience of their working than we have had so far. We have been able to make a series of announcements which have been of considerable help to Liverpool in most trying times.

Later—

Mr. Heffer: On a point of order, Mr. Speaker. You will have noticed that there has been a very serious error on the Order Paper in that the hon. Member for Liverpool, Wavertree (Mr. Steen) is described in Question No. 18 as the hon. Member for Liverpool, Walton. I have a feeling that my constituents will not take kindly to that printer's error. May we have it corrected?

Mr. Speaker: Yes, and I extend my humble apologies to both hon. Members.

Rating Surcharge (Empty Offices)

Mr. Wall: asked the Secretary of State for the Environment what is the latest available figure for the yield from the rating surcharge on unoccupied office properties levied under the Local Government Act 1974 and the cost involved in collecting this surcharge.

Mr. Guy Barnett: Details of the figures requested are not available centrally. Individual rating authorities may be able to supply figures relating to their own areas.

Mr. Wall: Is this type of surcharge still cost-effective? Has it not now outgrown its use, and will not the Minister consider its removal?

Mr. Barnett: I believe that it probably is cost-effective, not in terms of the sums collected but in that it is generally recognised that there was a widespread problem of commercial property being deliberately held empty in the hope of speculative gain. I believe that the surcharge has had a useful effect in helping to bring about a change.

Mr. Fernyhough: As police protection, fire protection and every other protection that the local authority provides is expected for such properties, why should


those concerned be excused making their contribution towards the cost?

Mr. Barnett: I accept that there is a case for ratepaying, but the Question is concerned with the surcharge.

EUROPEAN COMMUNITY (MILK MARKETING BOARDS)

Mr. Raphael Tuck: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the fact that six Members of Parliament were prevented last Monday evening from voting on a crucial matter in the EEC by reason of the necessity of their being in the House of Commons for the vote on the Finance Bill, with the result that they were unable to prevent the Agriculture Committee of the European Parliament from voting for the disbandment of the Milk Marketing Boards in this country".
The matter is specific because it deals with the invidious position of the Member of this Parliament who is also a Member of the European Parliament. It is important, because the results of the proceedings in the Agriculture Committee of the EEC last Monday may well be disastrous and nullify all the valiant efforts of my right hon. Friend the Minister of Agriculture, Fisheries and Food to keep the Milk Marketing Boards here in being.
The matter also calls into question the whole of our pairing system—whether it is right—and whether a Member of this Parliament should also be a Member of the European Parliament, as he cannot do both his jobs effectively.
The matter should have urgent consideration because this kind of thing may well happen over and over again, and it is up to this Parliament to see that it does not.

Mr. Speaker: The hon. Member for Watford (Mr. Tuck) gave me notice before 12 o'clock today that he would seek leave to move the Adjournment of

the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the fact that six Members of Parliament were prevented last Monday evening from voting on a crucial matter in the EEC by reason of the necessity of their being in the House of Commons for the vote on the Finance Bill, with the result that they were unable to prevent the Agriculture Committee of the European Parliament from voting for the disbandment of the Milk Marketing Boards in this country".
I listened carefully to the hon. Gentleman, but I cannot grant his request.

Mr. Lee: On a point of order, Mr. Speaker. As my right hon. Friend the Leader of the House is in his place, I wonder whether you would look kindly on any attempt by him to catch your eye if he can assist us in trying to avoid the kind of nonsense my hon. Friend the Member for Watford (Mr. Tuck) has been seeking to make a Standing Order No. 9 matter. My right hon. Friend may be able to assist us so that the damage done by the organisation in Brussels, Strasbourg or wherever it meets can be mitigated somewhat.

Mr. Speaker: The Lord President will have heard what the hon. Gentleman said, but this is not the moment for him to intervene.

BILL PRESENTED

EMPLOYMENT (CONTINENTAL SHELF)

Mr. Secretary Booth, supported by Mr. Secretary Owen, Mr. Secretary Benn, Mr. Secretary Varley, Mr. Secretary Millan, Mr. Secretary Dell and Mr. Harold Walker, presented a Bill to make provision for the application of certain enactments to employment connected with the exploration or exploitation of areas of the continental shelf adjacent to areas designated under the Continental Shelf Act 1964; And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed [Bill 127].

DESIGNATION OF REGIONAL BOUNDARIES

3.35 p.m.

Mr. Robert Hicks: I beg to move,
That leave be given to bring in a Bill to provide for the designation by the Secetary of State of regional boundaries for economic planning and associated purposes.
The Bill would make Parliament directly responsible for determining the number, the extent and the boundaries of our standard United Kingdom regions. At present regional boundaries are determined by Whitehall. Therefore, the Minister does not have to obtain the prior approval of this House. I believe that as a consequence, some of our regional bonndaries take little or no account of the characteristics or needs of the regions.
Under existing arrangements the regional unit is used as the basis of functions such as regional economic planning and the collection and dissemination of a whole range of statistics, such as housing, employment, income levels and so on, as well as numerous other functions.
I believe that it is a mistake that Parliament should have no statutory part in determining the number and extent and boundaries of the regions. This means in reality that all too frequently the regional divisions are drawn up to suit the convenience of Whitehall.
In many parts of the United Kingdom there exists a distinct expression of regional consciousness. In recent years this trend of preserving or establishing a regional identity has manifested itself in a number of ways. This is hardly surprising. We live in an age that has experienced unnecessary centralisation, an over-dependence upon London and a general movement of both economic activity and people from the peripheral and more rural parts of the United Kingdom to urban concentrations, particularly London, the Midlands and the South-East.
I believe that against this background any desire on the part of regions to reestablish their own identity should be encouraged. The need to recognise the genuine aspirations of belonging to and contributing to an identifiable regional unit is very relevant in the far South-

West, particularly in Devon and Cornwall. At present Cornwall and Devon are lumped together in a so-called South-West region that extends to include Bristol and Avon, Gloucestershire and Wiltshire.
The two far South-Western counties have little in common with those areas with which they are now linked. The basis of their economies differs significantly. Cornwall and Devon are far more dependent upon agriculture and fishing, tourism and the service sector. Industry is far more scattered. Apart from Plymouth, there are no major concentrations of population and economic activity. Furthermore, under the existing arrangements, Bristol, the so-called regional capital, is nearer to London than it is to Bodmin.
But the problem goes deeper than this, because the so-called South-West region is dominated by Bristol and Severnside, Gloucester and Swindon and the like. Therefore, regional statistics such as income levels and unemployment figures often make nonsense of the true position in the far South-West. Consequently, distortions abound, much to the cost of Devon and Cornwall.
I should like briefly to illustrate the point with regard to the incidence of unemployment. When officials or Ministers in Whitehall examine this, the position might not seem to be as bad as it actually is, because the current unemployment level for the whole South-West region corresponds approximately, in percentage terms, to the national average. But if we take Devon and Cornwall alone, the regional figure hides this, because the actual picture is far from satisfactory. Unemployment in the last 18 months has been consistently almost double the national average. Indeed, Cornwall has been in the unenviable position of experiencing the highest unemployment percentage figure of any United Kingdom development area for the past 15 months.
This regional imbalance is repeated in a number of circumstances, including income levels, where again, taking the South-West region as a whole, income levels approximately correspond to the national average. But again, once we go further west, in my own constituency, for example, they are 14 per cent. to 16 per cent. below the national average.
There is, then, little doubt in my mind that over the years, under successive Governments, Cornwall and Devon have suffered because Ministers and Whitehall in general have tended to look at the South-West region as a whole. As a result, our problems and our needs have been sacrificed in the far South-West for the sake of administrative regional tidiness.
It is for these very practical reasons, plus the fact that Devon and Cornwall represent, in my view, a very distinctive regional identity, that I wish to introduce the Bill today. It surely would be sensible for Parliament to become involved in the drawing up of our regions and deciding these boundaries. It would also indicate to the people concerned that this House recognises in a regional context that Bodmin has very little in common with Gloucester and Swindon, even if Ministers and Whitehall do not recognise it.

Question put and agreed to.

Bill ordered to be brought in by Mr. Robert Hicks, Mr. Peter Mills, Mr. Hugh Dykes, Miss Janet Fookes, Mr. David Knox, Mr. David Mudd, Mr. David Madel, Mr. John Hannam, Mr. Robert Adley, Mr. Christopher Brocklebank-Fowler, Mr. Neil Macfarlane and Mr. Ray Mawby.

DESIGNATION OF REGIONAL BOUNDARIES

Mr. Robert Hicks accordingly presented a Bill to provide for the designation by the Secretary of State of regional boundaries for economic planning and associated purposes; And the same was read the First time; and ordered to be read a Second time upon Friday 14th July and to be printed. [Bill 130.]

Orders of the Day — FINANCE BILL

(Clause No. 11; new clauses relating to stamp duty on house purchase, indexation for capital gains tax, deferred payment of duty on whisky or interest on repayments of overpaid tax.)

Considered in Committee. [Progress 8th May.]

[Mr. OSCAR MURTON in the Chair.]

Clause 11

CHARGE OF INCOME TAX FOR 1978–79

The Chairman: I think it would be for the convenience of the Committee if I made a short statement regarding the proceedings which will take place this day.
If Amendment No. 7 is agreed to, Amendment No. 23 cannot be called. I shall, however, call Amendment No. 20, which is consequential to Amendment No. 7, at the appropriate stage later in the proceedings.
If Amendment No. 7 is negatived, I shall allow an immediate separate Division on Amendment No. 23, and, if that is agreed to, I shall call its consequential, Amendment No. 24, at the appropriate stage.

3.45 p.m.

Sir Geoffrey Howe: I beg to move Amendment No. 7, in page 10, line 17, leave out '£7,000' and insert '£8,000'.

The Chairman: With this it will be convenient to take the following amendments:
No. 23, in page 10, line 17, leave out '£7,000' and insert '£6,000'.
No. 20, in page 10, line 29, leave out lines 29 to 38 and insert—


'Part of excess over £8,000


Higher Rate


The first £2,000
…
…
40 per cent.


The next £4,000
…
…
50 per cent.


The next £7,000
…
…
60 per cent.


The remainder
…
…
70 per cent.'.




No. 21, in page 10, leave out lines 29 to 38 and insert—


'Part of excess over £8,000


Higher Rate


The first £2,000
…
…
40 per cent.


The next £3,000
…
…
50 per cent.


The next £4,500
…
…
60 per cent.


The remainder
…
…
70 per cent.'.


No. 24, in page 10, leave out lines 29 to 38 and insert—


'Part of excess over £6,000


Higher Rate


The first £1,000
…
…
40 per cent.


The next £1,000
…
…
45 per cent.


The next £1,000
…
…
50 per cent.


The next £1,000
…
…
55 per cent.


The next £2,000
…
…
60 per cent.


The next £2,000
…
…
65 percent.


The next £2,000
…
…
70 per cent.


The next £5,000
…
…
75 per cent.


The remainder
…
…
83 per cent.'.


No. 29, in page 10, leave out lines 30 to 38 and insert—


'The first £3,000
…
…
40 per cent.


The next £4,000
…
…
50 per cent.


The next £7,000
…
…
60 per cent.


The remainder
…
…
70 per cent.'


No. 25, in page 10, line 33, leave out from beginning to end of line 38 and insert—


'the next £1,000
…
…
55 per cent.


the next £1,000
…
…
60 per cent.


the next £2,000
…
…
65 percent.


the next £2,000
…
…
70 per cent.


the next £5,000
…
…
75 per cent.


the remainder
…
…
83 per cent.'.


No. 22, in page 10, leave out lines 36 to 38 and insert—


'the remainder
…
…
70 per cent.'.

Sir G. Howe: The Committee will appreciate that, so far as we are concerned, there are really two amendments which march together in this debate. Amendment No. 7 seeks to raise the starting point from the 40 per cent. rate of income tax from £7,000 to £8,000 of taxable income, that is, from £140 a week to £160 a week.
Labour Members below the Gangway have moved, rather remarkably, by way of alternative to that, to lower the figure from £7,000 to £6,000, to a figure of £120 a week. We are astonished at that, but no doubt they will press their case as they think best.
Linked with our Amendment No. 7 is Amendment No. 20, which seeks to reduce the number of and to widen the higher rate tax bands, and to bring the top rate of tax on earned income down from 83p to 70p. The Committee will

see that it replaces the nine existing higher rate bands, which reach a figure of 83 per cent. at £23,000 a year in the Bill, with four bands which reach the top figure of 70 per cent. at £21,000 a year.
The third amendment which forms part of our group, Amendment No. 29, is relevant only if the first one, to raise the starting point from £7,000 to £8,000 a year, is not carried as Amendment No. 29 accepts that the £7,000-a-year figure remains the starting point but still seeks to widen the higher bands and bring down the top rate.
The first matter on which I think there is now fairly close agreement on each side of the Committee is the cost of these two amendments, Nos. 7 and 20, in the current year, if carried. To raise the threshold from £7,000 a year to £8,000 a year for the higher rate would cost—as I think my hon. Friend the Member for Blaby (Mr. Lawson) was told yesterday—about £40 million in the first year. To widen the higher bands and reduce the top rate to 70 per cent. would cost £155 million in the current year. Taken together, the two amendments would amount to a cost of less than £200 million in the first year, and the first one, on which we shall vote first, would cost £40 million in the first year.
To put it in perspective, that figure is less than one-third of a penny in every pound of total public spending which will take place this year. It is one-twentieth of the planned increase in public spending this year, or less than one-third of the proceeds of a single rate of value added tax of 10 per cent. The cost of these amendments, therefore, could be covered within those very modest figures and could be amply covered, more than three times over, if the Government were prepared to accept our repeated recommendation for a single rate of value added tax at 10 per cent.

Mr. Ron Thomas: I thank the right hon. and learned Gentleman for giving way. Will he please tell the House what the Opposition proposal will mean in terms of a tax handout for someone on an income of £25,000 a year?

Sir G. Howe: I shall deal with that in a moment. The hon. Gentleman talks about a tax handout, but the reality is that if all our amendments are carried in


full, the gentleman of whom he speaks, on £25,000 a year, will still be bearing a higher tax burden than he was after the Budget in March 1974.
Our figures do not go so far as to lighten the tax load back to the level to which the Chancellor of the Exchequer increased it in his first Budget in March 1974. Our figures do not lighten the real tax load to take it back to the point when the hon. Gentleman's right hon. Friend was riding high, in his howls of anguish and pip-squeaking mood. If these amendments are passed, the real burden on the gentleman about whom the hon. Gentleman is talking will still be more than it was in March 1974, as a proportion of total income. Labour Members are sophisticated enough to know that by talking about pounds as though they were still worth the same figure today as they were when the Labour Government started in office, they talk in meaningless terms. The real burden of tax, if these amendments are carried, will still be greater than it was when the Labour Government first started on their disastrous course.

Mr. John Pardoe: May I ask the right hon. and learned Gentleman to check the figure of £40 million which he estimated will be the cost of Amendment No. 7? Both of our parties are in agreement with regard to this amendment, but I think that he has made a mis-estimate. If he looks at page 10 of the Bill, he will see that after £7,000 of taxable income the table says:


"The first £1,000
…
…
40 per cent."


As the Bill is written, the effect of passing this amendment—which both he and I want passed—will work right the way up through the scale. The cost will not be £40 million. I think that we had better be absolutely clear about what we are doing. My best estimate is that it will cost around £105 million this year and probably £150 million in a full year.

Sir G. Howe: The answer that was given to my hon. Friend the Member for Blaby dealt with each of these points step by step. This amendment, as it stands, operates only to raise—[Interruption.]

The Chief Secretary to the Treasury (Mr. Joel Barnett): It would be as well to clarify this point. If the right hon.

and learned Gentleman looks at Clause 11, he will see that if one raises the threshold to £8,000, automatically one raises the threshold of each of the other bands. The net result of passing Amendment No. 7 as it stands would be a full-year cost of £150 million and a cost in 1978–79 of £105 million.

Mr. Robert Kilroy-Silk: The right hon. and learned Gentleman still does not understand it.

Sir G. Howe: The Chief Secretary must notice that another amendment is to be made. The mere passing of this amendment would leave the table, as it stands at the moment, with £7,000 still in it. But in all events the Committee is in no doubt about what is happening.

Mr. Joel Barnett: With respect, I think it is important that the Committee should know whether it is voting for £105 million or £40 million with regard to Amendment No. 7. The right hon. and learned Gentleman says that if we raise £7,000 to £8,000, it does not affect anything else. However, he must know that the first £1,000 in the table would then come after £8,000 rather than £7,000, and so on up the table. As I say, the net cost for 1978–79 is £105 million and £150 million for a full year.

Sir G. Howe: That is right. But we must remember that we are talking about two amendments. The first chunk raises £7,000 to £8,000 and, as a result, raises each step by £1,000. The second part seeks to raise the limits of the higher rate bands and to drop the top one. The total cost of both those amendments taken together is less than £200 million. The Chief Secretary is distributing the cost in a different way, and I can follow the way in which it is analysed.

Mr. Kilroy-Silk: If the right hon. and learned Gentleman cannot answer those difficult questions, can he answer a very simple one? It may well be that I would want to support him in the Lobby. Therefore, can he tell me the answer to the question posed by my hon. Friend the Member for Bristol, North-West (Mr. Thomas)? How much is he asking me to help to give, as a tax handout, to a gentleman earning £25,000 a year? [HON. MEMBERS: "How much do you earn?"] My income is the same as that of every other Member of Parliament.

Sir G. Howe: I am not asking the hon. Gentleman to give anything. I am asking the Committee to authorise the Government to take less. Even when the Government are taking less, they will still be taking more in real terms than when they first started. That is the reality.

Mr. Ron Thomas: Is the right hon. and learned Gentleman ashamed of the figures?

Sir G. Howe: Not in the least. I shall deal with them in detail in a moment. The Chief Secretary has been advancing figures for the cost, but one important point underlies the whole matter. If the Committee agrees to pass these amendments so as to lighten significantly the burden of taxation on higher income earners, there can be no doubt in anyone's mind that as a result the yield of income tax as a whole would increase substantially because of the greater willingness to work, to increase incomes and, frankly, because of the reduced tendency towards tax avoidance.
Certain Labour Members below the Gangway may laugh, but they should bear in mind countries which they may not have studied recently. For example, Ireland has reduced its top rate, very sensibly, from 80p to 60p in the pound in stages over the last three years. It has also recently had the good sense to abolish the wealth tax before it had hardly started. The experience of Ireland has been that within those years money is coming back into the country, investment is expanding and jobs are increasing, because it is seen to be a country which receives investment and encourages enterprise instead of one such as this country under the present Government.
I take an even more remarkable example. Between 1973–74 and last year India had the good sense to cast off the relics of what I suspect was a Kaldoresque tax regime and drop its top rate from 97·75 per cent. to 66 per cent.—the same order of change as we are now commending. In India the yield from income tax, particularly higher tax incomes, increased substantially as a result. It is the experience, and common sense suggests it, that if the top-rate tax burden is significantly reduced, people will take more risks, invest more, work harder and will be less concerned to take themselves

to their tax consultants. As a result, the tax collector will actually gather more.
Quite apart from that, the administrative costs of the system would be significantly reduced because there are fewer bands. Merely raising the starting point from £7,000 to £8,000 would probably release several hundred thousand taxpayers from the higher rate bands altogether. That would be one way of saving the huge increase in Inland Revenue staff which has taken place under this Government.
The Committee may remember the astonishing and, as it turns out, inaccurate claim made by the Chief Secretary when winding up the debate on 8th May. He told the Committee, to everyone's surprise, that the number of people employed by Inland Revenue and Customs and Excise had risen by 15,000 under the last Conservative Government and by only 13,000 under this Government. I have taken the precaution of checking the figures since then and the actual figures are as follows. On 31st March 1974, the total employed by Customs and Excise and Inland Revenue was 94,800. On the same date in 1970 the total was 86,500. There was an increase during the four years March 1970 to March 1974 of 8,300 in round figures. Almost all of that, just over 7,000, was in Customs and Excise following the introduction of VAT. From 31st March 1974 onwards, starting with 94,800 in March 1974, we had reached a total of 114,000 in the two services combined by the end of 1977. The increase under this Government from the end of March 1974 to the end of last year has been 20,000. The introduction of the reduced rate band as a result of this Budget will add another 1,000.
I hope that the Chief Secretary will confirm these figures. They are absolutely correct, and they put wholly into the right perspective the wrong figures which he gave. There was a total of 8,300 under the previous Conservative Government and a total of more than 20,000 under the present Government.

4.0 p.m.

Mr. Cranley Onslow: The Chief Secretary is sitting on the Treasury Bench like a glove puppet nodding and bobbing. Would it not be much better to tell us whether he agrees with my right hon. and learned Friend's figures? If so,


is he prepared to withdraw his stupid statement?

Mr. Joel Barnett: The hon. Member for Woking (Mr. Onslow) is an expert on stupid matters. I am bound to tell him that I am not inclined to accept figures that are thrown at me from the Opposition Front Bench. However, I am prepared to consider them, and I shall do so.

Sir G. Howe: A Treasury Minister speaking from the Dispatch Box does so with a certain authority. The House of Commons is accustomed to be able to take as accurate figures that are given from the Government Front Bench by a Treasury Minister. The right hon. Gentleman asserted a set of figures on Monday night. I have produced figures that I understand to be correct from parliamentary Answers. I am astonished that the right hon. Gentleman is unable to accept or refute those figures, he having produced another set of figures.

Mr. Onslow: The House of Commons has either been told the truth or it has been told lies. Which is it? Will the Chief Secretary tell us?

Sir G. Howe: The Committee will have to draw—

The Chairman: Let us not mention the word "lies." It is unparliamentary.

Mr. Onslow: Go on, tell us.

Sir G. Howe: I am content. I am grateful to my hon. Friend the Member for Woking (Mr. Onslow) for his encouragement and help. I am content to leave the matter as it stands. It is something that follows from the casual, reckless and negligent way in which the right hon. Gentleman treated the House on Monday. However, certain other matters follow.
On the basis of his figures the right hon. Gentleman sought to suggest that the saving achieved by reducing the army of tax gatherers would be quite modest. I think he said that it would amount to about £49 million. The average salary of those employed in the service of the Inland Revenue, based on the most recent report of the service, is £4,000 a year. If we add to that sum the cost of the service's overheads and administration,

the average per head employed is £5,650 a year. The 20,000 extra troops recruited to the tax collectors' army by the Government are costing the taxpayer £110 million. As it happens, that is almost exactly the cost of the amendment as calculated by the Chief Secretary.

Mr. Onslow: Now refute that.

Sir G. Howe: If we were to get rid of the huge accretion of tax collectors, we should be well on the way to paying for the totality of the cost of the amendments.
Let us examine the case for the amendments. We know in advance the way in which Ministers will respond to our case. They will reveal one of the two faces of the Labour Party. No doubt they will reveal its most unattractive face. There is a curious feature about the way in which the Labour Party addresses itself to this issue. On some occasions and on some platforms the Prime Minister, the Chancellor of the Exchequer and even the Chief Secretary say "Of course, we want to encourage risk taking. We recognise the importance of incentives. We recognise that the income tax burden is too high and must be reduced." However, as soon as any party comes before the House and proposes the most modest change to correct any imbalance in the smallest direction, Ministers leap to the Dispatch Box and argue exactly the opposite case.
During Prime Minister's Questions on Tuesday, the Prime Minister—having made many speeches at dinners and conferences of managers and industrialists throughout the country to the effect that the tax burden must be lightened—took the opportunity afforded by his first appearance at the Dispatch Box following the passage of our amendments on Monday to refer to the amendments that are to be passed. He said that they
will increase materially the difference between the poor and the rich."—[Official Report, 9th May 1973; Vol. 949, c. 973.]
Of course they will. How do we set about reducing the direct tax burden and moving one inch in the direction of improving incentives without increasing the difference between the poor and the rich? Indeed, the Budget increases the difference between the poor and the rich. It makes larger reductions for those at the top income levels than at the bottom


levels. It is sheer hypocrisy for the Government and the Labour Party to continue trying to present their two arguments in the same way. The Labour Party talks with two voices and presents itself with a most unattractive face when it addresses itself to these matters.
The reality is that in submitting these amendments we are concerned in the generality with special skills, special responsibility, managers, those with enterprise, key figures in activities of all sorts, skilled workers and enterprises that need to grow and those who can lead and command resources that will create the jobs for the employment of the British people. To have singled out those categories for the imposition of tax rates that are higher than anywhere else in the free world at lower levels of income than anywhere else in the free world is sheer lunacy. To persist in defending those tax rates, as the Government now do, is to demoralise those who are subject to the higher rates of income tax, to destroy their morale and to drive out those who are at the very heart of our economy.
Moreover, the tax rates as they now bite have never been justified before the House of Commons. The burden that they now represent has been imposed by stealth by four years of record inflation, which has carried taxpayers into higher and higher tax rates. Inflation has served to increase the burden without the House of Commons doing anything about it.
The Chief Secretary may have had the opportunity of listening to the interview that was given by the Chancellor of the Duchy of Lancaster to his old friend Brian Walden, who was the Member of Parliament representing Birmingham, All Saints.

Mr. J. W. Rooker: Birmingham, Ladywood. Wrong again.

Sir G. Howe: Yes, Ladywood. The interview was given on "Weekend World" on St. George's Day. The former Member for Birmingham, Ladywood is a man of greater insight into these matters than the hon. Member for Birmingham. Perry Barr (Mr. Rooker). The Chancellor of the Duchy said:
The rate of tax on salaried talent is very high in this country … The putting of this right is a massive problem that will take a

little time, and I believe this to be a No. 1 priority in the Chancellor's mind for future action—that's my own view: it ought to be.
The Chancellor of the Duchy went on to describe exactly how the tax came to be imposed. He said:
I must say that when it was put on
—that is the 83 per cent.—
it was put on at a more realistic level than now applies. It was actually inflation that really made the tax so burdensome. And I don't think any Government ever responds quickly enough to the deforming of their tax structure by inflation. And we may be open to criticism for not responding fast enough to that.
The Chief Secretary knows perfectly well that the Chancellor of the Duchy is there acknowledging that tax rates are too high and that they have been made too high by the progress of inflation, which has dragged more and more people into destructive tax levels. In the past four years we have experienced a savage and continuing reduction of post-tax differentials. Everyone has experienced large cuts in his standard of living in the past five years. The average wage earner with a wife and two children has, on the latest figures, experienced a cut in his standard of living of just over 4 per cent. in the past four years. The man on twice the average wage has seen his standard of living cut by 7·4 per cent. The man on three times the average wage has seen his standard of living cut by 13·9 per cent. Senior managers and chief executives have seen their standard of living cut by 20 per cent. or even 30 per cent.
That has been happening to those upon whom the Government rely for giving leadership in industry and commerce. It is absurd to expect them to be applying themselves to their work, engaging in risk-taking and gaining further qualifications with just the same single-minded energy and enthuiasm when they have been necessarily obsessed with struggling to maintain the standard of living in the face of rapidly rising tax burdens.
I turn to the argument raised by the hon. Member for Bristol, North-West (Mr. Thomas). The 83 per cent. rate of income tax was introduced by the Government in March 1974 at a starting point of £20,000. If we take account of inflation since that date, the starting point for the 83 per cent. rate, if it is to survive at all, should now be £37,400. The Government


are proposing in the Bill an increase to £23,000. That is equivalent to £12,300 in 1974. Therefore, the relaxation of £2,000, the raising of the threshold, the beneficent act contained in the Bill, results in the imposition of the top rate of tax at about £8,000 lower in real terms than when the Chancellor first introduced it.
The amendments have the following effect. The higher rate threshold in March 1974, as the Committee will remember, was reduced by the Chancellor of the Exchequer in the first flush of Socialist enthusiasm. The higher rate threshold was lowered to £4,500. The starting point for the higher rate threshold today should be £8,400. We are merely proposing that it should be increased to £8,000.
The 68 per cent. rate, which was enforced in March 1974, started at £12,000. The starting point for that rate, which is the equivalent of the 70 per cent. rate that is in the amendment, should today be £22,500. We propose that it should start at £21,000.
Therefore, for those bands we are proposing changes that take taxpayers into higher rates of tax at lower real levels of income than when they were first introduced by the Chancellor in 1974.
I am sure that we shall hear again today about the man on £50,000 a year to whom the Chief Secretary referred at the end of the Second Reading debate. In the jargon of the style of Socialism that the right hon. Gentleman was using, he said that our proposals would give back to that man several thousand pounds. Even a man on £50,000 a year, after these amendments are carried, will still be paying a larger proportion of his income in real terms in tax than he was in 1974.
I am astonished—but it is a deliberate decision—at the moderation of our proposals. Even if these amendments are carried, a married man on £20,000 a year will still be paying two-fifths of his income in tax, a married man on £30,000 a year will be paying more than half of his income in tax, and a man on £25,000 a year will be paying tax at a marginal rate of 70p in the pound.
Let us compare that with all the countries with which we have to compete. In Ireland—the highest of those in the OECD—a married man on £25,000 a year

pays a marginal rate of 60p. In France, he pays a marginal rate of 36p in the pound. The average of the countries with which we have to compete is 48½ per cent. tax on a man earning £25,000 a year compared with the 70 per cent. which we propose, even if the amendments are carried.
I again invite the Committee to listen to the words of the Chancellor of the Duchy of Lancaster in the interview to which I referred earlier. He said:
I don't deny that there has to be a move to make our tax rates, especially on earnings, comparable with what our rivals or our friendly partners on the Continent have in the way of tax rates. Of course that has to be done. Otherwise, as I said candidly, the consequences will be damaging to our economy.
Has the Chancellor of the Duchy been expressing that view in the Cabinet? Is it a view with which the Chief Secretary has some sympathy? Does he not recognise that this is the damage being done by the taxes which the Government continue to maintain?
Let us consider the practical effect of the extent to which the Government now have to juggle, fiddle and wriggle with their own tax system to provide licensed loopholes for people whom they regard as being unduly penalised.
The Bill contains special provisions to deal with North Sea divers, because they are close enough to competitors in other countries to realise how savagely they are being taxed. Good luck to them. The Government are making a loophole—an escape hatch—for those people.
Those who, under this Bill and under last year's Finance Act, are getting relief on overseas earnings are also being given a special licensed loophole from the absurd tax system which prevails in this country.
Let us consider the damage that is being done by the outflow of talent from this country as a result of these crucifyingly high rates of tax.

Mr. Ron Thomas: Tom Jones and Humperdinck.

Sir G. Howe: Indeed. The hon. Gentleman quotes Torn Jones and Humperdinck. But let him harken to the roll call of people whose names are well known who have left this country because of high marginal tax rates: Tom Jones,


David Bowie, James Hunt, Jackie Stewart, Sean Connery, Richard Burton, Marty Feldman, Len Deighton, Joe Bugner, the Rolling Stones, Englebert Humperdinek—[HON. MEMBERS "Roy Jenkins."]—All right, Roy Jenkins—Tony Jacklin, Virginia Wade, Wolf Mankowitz, Peter Sellers, David Niven, James Mason and Michael Caine. Labour Members below the Gangway may laugh, but these people form the seed bed of the expansion of our own film and entertainment business.

Mr. Kilroy-Silk: Labour Members laugh, rightly, at the pious indignation that the right hon. and learned Gentleman displays for the kind of people about whom he is now talking. But many thousands of my constituents would give their right arms just to have the privilege of paying tax. Does he not consider them to be more worthy of his indignation than the non-patriots about whom he is now talking?

Sir G. Howe: I do not know whether the hon. Gentleman ever reads the observations of Mr. Alan Sapper, the general secretary of the Association of Cinematograph, Television and Allied Technicians. If so, he may have noted the powerful memorandum that that trade union leader—not a subscribing member of the Conservative Party; on the contrary—sent to the Treasury two years ago in terms saying that the penal rates of taxation applying to those in the film industry were virtually destroying the British film industry. That is the reality. I just happened to choose names which were well known. For every one of these names, of whom we have all heard, there are 10,000 others with different skills—managers, engineers, doctors, physicians—who leave this country and take with them the life blood of our prosperity.
I do not know what Labour Members find when they talk to people in leading companies in this country. I doubt whether they ever do. They are not concerned with those who provide the employment for their constituents. But they will find—I am sure that the Chief Secretary will have found this—that every major company is complaining of the departure or the impending departure of two or three key executives as a result of our penal rates of taxation.
One example, with which the Committee may be familiar, was in evidence given to the Diamond Commission by ICI two years ago. ICI brought back on to membership of its main board in this country someone with long experience as a senior executive of one of its subsidiaries abroad. The reward for that man's arrival at the pinnacle of his industrial career was to have his post-tax take-home pay reduced by 50 per cent. That was the consequence of our tax system. It is total lunacy.

4.15 p.m.

Dr. Jeremy Bray: Has the right hon. and learned Gentleman ever asked the key companies the question that I have asked a number of them—whether, in the event of tax cuts of the kind that the Opposition are proposing, they would increase the salaries of their senior executives as much as those of their ordinary manual workers? The answer that I get is "No". Has the right hon. and learned Gentleman considered the after-tax position of the people about whom he is so worried?

Sir G. Howe: I was coming to that point. One of the reasons why companies sometimes find themselves having to pay high pre-tax salaries is the huge bite made by the tax collector in those salaries. I give one example which is quite impressive and which I believe to be reliable. When British Leyland was undergoing its recent and understandable reorganisation, one of the people whom it was desired to bring back to Britain with senior management experience in North America had to consider what salary he would get post-tax in Britain if he came back. His post-tax salary in North America was £30,000 a year. For the sake of returning to the job, he was prepared to come back to Britain on a post-tax salary of £20,000 a year, but, because of our tax system, it was not possible to deliver him a post-tax salary of £20,000 a year unless he was paid £95,894 gross. That is the point that the hon. Gentleman makes.

Dr. Bray: No.

Sir G. Howe: It is a point which seems to follow the point that he made.

Dr. Bray: With respect, the right hon. and learned Gentleman ignores the demand for senior executives. If he looks


at the wage negotiations going on in Holland, he will find that companies are under pressure to set a ratio of 1:5 between the average and the maximum rate of pay in this country. There is a great change in supply and demand in terms of the greater availability of senior executives.

Sir G. Howe: I do not understand the point that the hon. Gentleman is endeavouring to make. We have been told by Treasury Ministers in successive debates that the differentials in this country are now lower than virtually in any other country in the world. I recall the Minister of State telling us two years ago that the post-tax differentials here were now lower than they were in China.
The reality is that companies in this country are finding it extremely difficult to bring back people with overseas experience. Once they send a man abroad to get overseas experience, it is almost impossible to get him back. Indeed, it is extremely difficult to persuade people to move within this country. A recent survey showed that one in three senior managers was refusing to move even for pre-tax increases of £5,000 a year because post-tax, after having taken on the responsibility and made the move, it was hardly worth while.
The argument against the amendment—we shall hear it from the Dispatch Box shortly—will be that the man on £30,000 a year will be given, to use the jargon beloved of the hon. Member for Perry Barr, about £2,193 per annum. The reality is that he will still be paying more in taxes in real terms and having a substantially lower income after the amendments are passed than he would have been paying in 1974. This is an inevitaable feature. This is the oddity in the position of the Labour Party.

Mr. Rooker: I am grateful to the right hon. and learned Gentleman for giving that figure. It is most useful. Will he give us the other figure, which is equally important—namely, the pay rise that the person on £30,000 will need to give him that net take-home increase?

Sir G. Howe: Under the present tax regime—

Mr. Rooker: It is £12,000 a year.

Sir G. Howe: Under the present tax regime, it is no doubt a very large one. The hon. Member for Perry Barr and his hon. Friends must understand that if one makes a change in the basic rate of income tax of one penny, or any amount, to reduce the burden of income tax, as a matter of arithmetic those who are ridden with envy and egalitarianism such as some hon. Members are bound to be able to say that a man on £200,000 a year who gets a penny off every pound is £2,000 a year better off.
Which is the true face and voice of the Labour Party? Is it that which says "This change will increase materially the difference between the rich and the poor"? If it is the face and voice of hon. Members below the Gangway who want to bring the top rate down to £6,000, then we are heading for disaster. Then we are heading for a society of drab, indifferent equality in which all motivation and incentive is destroyed.

Mr. Nicholas Ridley: Is my right hon. and learned Friend aware that if he could design a tax system when he becomes Chancellor which has the effect of persuading Engelbert Humperdinck to come back here and the hon. Member for Ormskirk (Mr. Kilroy-Silk) to emigrate he would have my full support? It would be a good swap.

Sir G. Howe: I am grateful to my hon. Friend. It is an idea that has a great deal more to commend it than the ideas of Government Members. I do not shrink from it. Dozens of names are recognisable. They are the names of those who create the talent in our film and entertainment industry. For every one of those there are tens of thousands of other people whose departure destroys the wealth of this country, and who have left as a direct result of the Government's tax policies.
The voice of the Labour Party that one likes to hear is that of the Chancellor of the Duchy of Lancaster. Talking to his former hon. Friend the Member for Birmingham, Ladywood the Chancellor of the Duchy said
My own view is that a correction is now overdue, and I think that we will see one … I must be frank and say that many of these taxes owe more to a judgment of an egalitarian kind than to an economic kind.


Mr. Walden then said
You say you think that a correction is overdue, and I take that to mean that you think that the higher rate of tax should be cut, and cut substantially.
The Chancellor of the Duchy replied:
As soon as it is possible to achieve that … The 83 per cent. rate … is too high and has to come down as soon as we can possibly bring it down.
Mr. Walden said:
It's the Labour Party that put the 83 per cent. rate on, wasn't it? It wasn't God. It didn't get there by fate. You put it on, didn't you?
The Chancellor of the Duchy replied:
Yes, that is true.
Mr. Walden said: "Yes, well?" and the Chancellor of the Duchy went on:
Well, I must say that when it was put on, it was put on at a more realistic level than now applies.
Which is the true voice of the Labour Party? Is it that of the Chancellor of the Duchy speaking like this on television hoping to catch some votes that way, or that of the egalitarians who will speak from the Dispatch Box today? If the Government are prepared always to rely on the combination of cowardice and envy of their hon. Friends below the Gangway—and they certainly do not represent the voice of the people—and if the Government always use this arithmetic to abuse sensible tax policies, common sense will never prevail. When is the time to which the Chancellor of the Duchy is looking forward? The time should be now. I invite my hon. Friends to support the amendment.

The Minister of State, Treasury (Mr. Denzil Davies): We have heard an extraordinary speech from the right hon. and learned Member for Surrey, East (Sir G. Howe). He made some strange assertions and suggested that being taxed as self-employed was a licensed loophole. That is a strange remark to come from the Opposition Front Bench.
One could describe these amendments, after what the right hon. and learned Gentleman has said, as the "bring back Hump" amendments. Most of his speech was concerned with the need to bring back to our shores various pop stars, artistes and sportsmen who have been driven away by tax policies.
The Committee and the country will be grateful to the Tory Party for one thing in relation to these amendments and

the amendment which was carried on Monday. At least they give us an indication of how the Tory Party, if it ever came to power, would frame its Budget. The amendments are a clear indication of the Tory Party's priorities. Amendments Nos. 7 and 20 and the amendment which was carried on Monday represent the Tory Party's mini Budget. They give us an insight into the thinking of those on the Opposition Front Bench about how they would operate if they came to Government. One must look at the amendments in that context.

Mr. Nigel Lawson: When the Minister looks at this in context, will he also look into the substantial increases in the personal allowances which we forced through last year and take those into account?

Mr. Davies: I appreciate that the hon. Member feels that he has salved his conscience by causing the personal allowances to be increased last year. Now, he feels that he has done his little bit and he is prepared to press these amendments.
We must look at the amendments and ask whether the present Tory leadership is less financially imprudent than its predecessors in Government. We must ask whether the amendments show that it has any sense of justice and fairness in framing a tax system. To both those questions, the answer must be "No". After Monday's debate and today's debate, if these amendments are carried, one must conclude that the present Tory leadership is financially imprudent on such matters as the public sector borrowing requirement and that it has learned nothing. One must conclude that it has an abysmal sense of justice and equity.

Mr. Ridley: Does the Minister conclude that the tax rates in the March 1974 Budget were most unfair because the tax rates which we are proposing are more egalitarian than the rates in the 1974 Budget for which the Minister voted?

Mr. Davies: Today's amendments show an abysmal sense of justice and fairness in relation to the tax system. I hope that I shall be able to prove that.
The right hon. and learned Member moved Amendment No. 7 and bracketed Amendment No. 20 with it because the two go together. There has been argument and debate about costs. On our


figures, Amendments Nos. 7 and 20—I do not think that there is any dispute—would cost £190 million this year and about £380 million in a full year. If we take the 1p reduction in the standard rate, for which the Committee voted on Monday, the consequential effect on advance corporation tax and today's two amendments, together with the proposed amendments on investment income surcharge, the total cost for this year would be £573 million. We tend to ignore the full-year cost although that is the real cost. The cost of that clutch of amendments in a full year would be £785 million.
Today we are debating whether we should benefit certain people in a full year to the tune of £380 million. The right hon. and learned Gentleman does not like the phrase "give back", he prefers the word "benefit". The two amendments would cost more than the amendment which was carried on Monday. The Tory Party is suggesting amendments that would benefit a small number of people and would cost more than the amendment which was carried on Monday.
4.30 p.m.
We have still not heard from the right hon. and learned Gentleman how he proposes to finance this sum of money—apart from his foray into suggesting that the Inland Revenue staff should be reduced by 20,000 to save £110 million. He brought a little list to the Dispatch Box on Monday, but it was demolished by my right hon. Friend the Chief Secretary. Now he has returned to say that he finds the £110 million figure quite unrealistic in terms of the Inland Revenue, but he has not submitted any other list. He has not come back and said that my right hon. Friend the Chief Secretary was wrong. He has made no proposal for finding the money.
That gives us a clue to the fact that the Opposition are not concerned about that aspect. They just do not care. Their main objective in proposing these amendments is to inflict as much damage as possible upon the economy, especially the financial economy of the country, in the hope that the opprobrium for that will fall upon the Government. That is the only conclusion that one can reach over

the Opposition's failure to advance any programme to finance these costs.
The Opposition adopt that attitude confident in the knowledge that those elements in the City which so piously preach financial rectitude will be quite happy to discard that principle when they see that the fat benefits that will come to them if these amendments are carried.

Sir G. Howe: Before the Minister of State ceases his own pious preaching, will he confirm two simple facts? First, will he confirm that the cost of this amendment this year would be no more than one-twentieth of the total increase in public spending this year—£200 million being one-twentieth of £4,000 million? Second, will he confirm that the cost of the amendment would be less than one-third of the yield of going to a single rate of VAT at 10 per cent. this year? Provided we are clear about that, the Minister's preaching is put into perspective.

Mr. Davies: The right hon. and learned Gentleman should not put forward proposals that are based on complicated fractions. The figures are quite clear. The total cost in a full year is £380 million, and the cost of Monday's amendment was about the same, producing a full-year figure of over £700 million.
The right hon. and learned Gentleman got himself into some difficulty when he tried to explain to the Committee the cost of Amendment No. 7. It is important to make this point because, as you have indicated, Mr. Murton, there may be separate Divisions on Amendment No. 7 and Amendment No. 20. Amendment No. 7—the right hon. and learned Gentleman grasped this in the end although it took him some time, until he was assisted very ably by the hon. Member for Cornwall, North (Mr. Pardoe)—would cost £105 million this year and £150 million in a full year. The reason for that is that Amendment No. 7 is not confined to raising the basic rate threshold from £7,000 to £8,000. That £1,000 is transmitted right up the scale. It might be possible to construct an amendment merely to affect the threshold, but that would have some effect on the tax profile higher up.

Mr. Rooker: If that is the case, and I certainly accept that it is, why did not


the Treasury make that clear in the answer it gave to the hon. Member for Blaby (Mr. Lawson) on Monday? That answer has not only allowed the Opposition to fall into their own trap in making the point across the Dispatch Box but will create the impression outside the House that the apparent cost of the proposal would be only £40 million when it is two and a half times the amount that was given in answer to the Question.

Mr. Davies: I had better look at the answer to which my hon. Friend refers, but it is quite clear to everyone outside the House that the cost would be £105 million this year and £150 million in a full year.
Amendment No. 7, in effect, means that a married man earning £8,000 will get no benefit. In order to get only minimal benefit from it, a man must have gross earnings of £10,000. A person with a mortgage who is earning £10,000 would just come within the tax charge on the higher rate.
A lot has been said about the need to help the so-called middle manager. I do not know who the middle manager is or how he is defined. There are certainly not many middle managers in Wales, although there may be some in England, who earn £10,000 a year. I stress, therefore, that Amendment No. 7 would not help anyone earning much under £10,000 a year.

Mr. Pardoe: We had better get clear just what we mean by "middle managers". The tax correspondent of the Financial Times on 12th April referred to middle managers as being those in the area around £10,000 to £12,000 total income. The Minister of State will find that the average pay at ICI is £6,000. There are thousands of people working for ICI with incomes well above £10,000. Why is he defining middle management as being in a lower income bracket?

Mr. Davies: I suspect that middle management varies from company to company. A middle manager in a company such as ICI probably earns more than a middle manager in a smaller company. I do not regard the term "middle manager" as particularly helpful. However, it is used just the same as the term "skilled tradesman" and various

other descriptions of categories of people are used.

Mr. Ron Thomas: I do not know where the hon. Member for Cornwall, North (Mr. Pardoe) gets his figures. May I suggest that he examines the new earnings survey which was published last year—the latest available—where he will see that only 13 per cent. of top managers earn more than £200 a week? Hardly any managers in the column headed "Managerial (excluding general management)" earn that figure.

Mr. Davies: We shall not resolve this point. We would do better to talk in terms of income. Persons with gross earnings of £10,000 a year will get hardly any benefit from Amendment No. 7, especially if one takes a mortgage into account. Without the mortgage, the benefit is still very small.
The full cost of the two amendments would be £380 million in a full year, but we ought to consider different income levels—

Mr. J. Enoch Powell: The Minister of State has made it clear to the Committee that if Amendment No. 7 were carried by itself its first-year cost would be £105 million. He may be about to state this figure, but I wonder whether he will do it now. What would be the further additional cost if, on top of that, Amendment No. 20 were carried?

Mr. Davies: The further additional cost in this year would be the difference between £105 million and £190 million, which is £85 million. The cost in a full year of Amendment No. 7 is £150 million, and the full-year cost of both amendments is about £380 million. The difference is because within the Amendment No. 7 area there are more PAYE cases. In the higher levels we have Schedule D and dividend income, which comes in the following year. That is why the full-year cost is greater.
Opposition Members are not interested in a person earning £50 a week, but such a married man with two children would receive nothing from the amendments. He is not meant to get anything from the amendments. The great victory on Monday which the Opposition managed to obtain meant that he will receive an extra 2p a week. The married man earning £80 a week—whether that is the average


wage, I do not know—receives nothing at all from the amendments. He is not meant to get anything. The famous victory on Monday gives him 33p a week, so, as a result of the Tory mini Budget, he receives 33p a week extra.
A salary of £10,000 a year is a large sum and it brings in many, if not all, middle managers. A person earning this figure would benefit under the two amendments by £1·60 a week. That is not a large sum for a person who is in a responsible position in industry. One has to be earning £15,000 a year before one receives the real benefit from these amendments. It is those earning between £15,000 and £50,000 a year about whom the Tory Party is so concerned.

Sir G. Howe: Does not the Minister recognise that it is precisely these people about whom the Chancellor of the Duchy is concerned? If the Minister was direct enough to accept the case put by the Chancellor of the Duchy of Lancaster, he would be supporting the amendment, as he ought to be.

Mr. Davies: If these amendments are passed, a person on £15,000 a year will receive some £500 a year—about £10 a week. A person earning £25,000 a year will receive some £1,500 a year—about £30 a week. The man earning £50,000 a year this coming year benefits by—I shall not use the words "given back"—almost £5,000 a year. The skilled middle manager in industry earning up to £15,000 a year is not helped by the amendments. They help only the people earning more than £15,000. All these figures are in addition to the benefits received as a result of the Budget.

Mr. Ridley: Will the Minister of State say why, in quoting figures up to £15,000 a year, he gave the benefit as a weekly amount but when he went over £15,000 a year he gave the benefit in an annual amount? Is not that typically deceitful?

4.45 p.m.

Mr. Davies: I am not very good at dividing. I thought that it might be clearer to the Committee and to the country if I gave the figures in annual terms. I am sorry that the hon. Gentleman does not like the figures. Only a Tory Party could propose a fiscal change which gives nothing to a man struggling on £50 a

week and gives £5,000—25 per cent. in excess of the average national wage—to a man earning £50,000 a year. I am surprised that the Liberals are prepared to go into the Lobby with that sort of amendment. It shows the abysmal sense of justice and fairness of the Conservative Party. It is disgraceful.
It is not as if the higher income people had not received something under the Budget. A person earning £15,000 a year benefits from the Government's Budget by £393. A person earning £25,000 a year will benefit by £663. Whatever that man is producing—whether it is goods, bits of paper or nothing at all—£663 is not sufficient according to the Tory Party. Under the amendments he must be provided with a further £1,500, presumably to make him work harder, take greater risks and benefit the economy.

Mr. Malcolm Rifkind: If the Government think that the Budget was so satisfactory in this respect, can the Minister indicate why, 12 days after the Budget Statement, the Chancellor of the Duchy of Lancaster said:
A correction is now overdue and I think we will see one"?

Mr. Davies: The hon. Gentleman has not been listening. I am saying that when any Budget or any amendment is framed, every political party with a sense of responsibility should try to achieve fairness and balance between different groups in the community. In the Budget we have tried to do so by providing a large benefit of £600 for a man earning £25,000 a year. The question for the Committee to decide is whether the benefit should be almost tripled in that case and others.
We feel that, in terms of the financial situation and the need to have a fair Budget for all groups, the Government's Budget is fair to those people and provides them with an incentive and with the necessary rewards. The case made on behalf of the Conservative Party—we did not hear much of it in the opening speceh of the right hon. and learned Member for Surrey, East because he was concerned in the main with pop stars—is that the money should go to the risk takers. The argument was that the risk takers should receive this extra benefit to help industry. I am using the neutral


word "benefit". An extra £1,500 in a person's pocket is a benefit. I suggest that much of this money may not go to the risk takers in industry or to the manufacturing side which is doing rather badly.
Let me give a few figures, while expressing certain caveats in regard to them. About 40 per cent. of the benefit of the amendments is likely to be received in respect of unearned income. I know that many people have a mix of income and that it is difficult always to determine which benefit goes to which income, but, with that caveat, it is fair to say that about 40 per cent. of the benefit will be in respect of unearned income.
It is also fair to say that much of the benefit will go to Schedule D. This is why the full-year cost exceeds the first-year cost by so much. There is nothing wrong in benefiting people on Schedule D, but the amendments would mean that much of the benefit would go to professional partnerships of lawyers, accountants and stockbrokers who have not incorporated themselves, professional groups in other areas and sole traders. They may be worthy people, but that sector of our economy, certainly the banking and financial sector, is thriving. A substantial amount of the benefit would go to those areas. Not much would find its way into manufacturing industry.
Only 42 per cent. of the total income from higher taxes is PAYE income. That does not mean that there is not a percentage of Schedule E income on top of that, but less than 50 per cent. of the benefit under the amendments would go to manufacturing industry. Indeed, it would be far less than 50 per cent. because salary levels in banking and the financial side of the economy are higher than in manufacturing industry.
These amendments are the sort one would expect from the Tory Party. I am surprised that the Liberal Party is supporting them. They demonstrate again that the Tory Party cannot claim to be a national party concerned with justice and fairness between all groups in our society. On the evidence of these amendments, the Tory Party is merely a pressure group for the well-off.
The amendments would do nothing for manufacturing industry or for the areas of the country which have suffered high

unemployment and social deprivation. I ask the Committee to reject them.

Mr. Marcus Kimball: The personal allowances at the bottom end of one's income have been indexed, Surely, in justice and fairness we should accept that the thresholds at which taxes start should also be related to the fall in the value of money. I am sorry that I did not hear my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) take this robust view about the value of the thresholds.
I do not think that Labour Members will ever appreciate the disproportionate and growing burden of taxation carried by those who earn or look after their savings to get the best result from their investments.
We can see how unnecessarily vindictive the Chancellor has become towards people who pay higher rates of tax. Let us consider his reactions to Monday's vote. He said that the cost of the amendment that we passed would have to be borne by the better-off, through a higher national insurance contribution for employers, higher company taxation or higher stamp duty. The important point about Monday's vote was that it showed the political will to cut taxes. I hope that we shall show that again today.
We are not here to argue about exact economic judgments. If we started to look at such judgments, we would not be given a very good example from the Chancellor of the Exchequer. No one really believes that his budgeting up to 5th April 1979 is so right that £340 million will put it wrong. The Chancellor does not know what the level of wave settlements, overtime and earnings or special responsibility payments to executives will be. His 1977–78 forecast was out by £1,350 million. I doubt that he will do very much better this year.
Let us consider the position of the better-off. My right hon. and learned Friend the Member for Surrey, East spoke about an 83 per cent. rate of tax on earned income and a 98 per cent. rate, for some people, on unearned income—compared with a European average of about 60 per cent. For most people, it is the higher rates of tax and not the top rates which matter. These higher rates range from 40 per cent. at £8,000 to 83 per cent. at just over £20,000 of earned income.
The Minister of State mentioned the marginal relief granted in the Budget. It is only marginal because there has been no change in these thresholds since the 1973 Budget, and in that time the value of our money has halved. If the value of one's money has halved one ought to have succeeded in doubling one's income, and if one has doubled one's income and earning capacity since 1973 one will be paying far higher taxes than ever before. That is why living standards have fallen. For most people, they have fallen by 30 per cent. under this Government.
The amendment does not go nearly far enough. The equitable and fair thing to do would be to double all tax thresholds. The same arguments as apply to personal allowances at the bottom end of one's income apply to the tax thresholds the whole way through. The 40 per cent. rate should start at £10,000—the amendment merely seeks to make the starting point £8,000—and the top rate should not apply until someone had succeeded in earning £40,000.
The cost of cutting the top rate of tax on earned and unearned income to 60 per cent. would be £250 million in a full year. That is well within the Chancellor's miscalculation of £1,350 million of the yield from income tax last year. The cost of doubling all the thresholds, which I should like to see, would be £500 million. This would be a fair and proper thing to do. Like my right hon. and learned Friend who moved the amendment, I am convinced that much of this tax relief would be saved because the additional incentive provided would more than pay for the cost.

Mr. Ron Thomas: I have not heard in my time in the House, which, admittedly, has been relatively short, a clearer example of blatant class interest than that which has been expressed by the Tory Party today. I am amazed that the Liberal Party can contemplate going into the Lobby to support the Tories on these amendments.
The Liberals should look back at some of the radicals in their party, such as Lloyd George, and consider their views on trying to bring about a fairer distribution of wealth and income. If the Liberals support these amendments, they will be voting for a distribution of income

that will be regarded as intolerable by many of the people whom they claim to represent. That is a pure piece of blatant class interest.
5.0 p.m.
When the hon. Member for Gainsborough (Mr. Kimball) referred to the question of inflation and the impact that it has had on certain levels of income, he fell into a trap that he could have avoided with a little careful thought. Had he looked at the General Index of Retail Prices and the way in which it is weighted, he would have seen that it applies to what is described as "the average family". If one is earning below the average family income the rate of inflation has been higher. If one is earning above it, the rate of inflation has been much lower.
This is one of the objections that could be made to the right hon. and learned Member for Surrey, East (Sir G. Howe), who gave figures for what tax thresholds should be today to keep the higher levels of income in line with those prevailing in 1974. But if one looks at the retail price index one sees how much people spend on food, for example. It is ludicrous to suggest that someone earning £50,000 a year needs to spend 10 times more on food than someone earning £5,000 a year. I suppose that is possible, but I would find it very difficult to believe.
Therefore, the level of inflation has gone up more for pensioners and the lower paid, because of the large amounts that they have to spend on food, electricity and other items, than for those on £10,000, £15,000, £20,000 and £25,000 a year. Therefore, the argument that those bands of income should keep pace with inflation just does not hold water.
The blatant class interest of the Tories can be seen by the fact that the 1p cut in income tax that was passed last Monday will mean an extra £370 million in a full year, and that these proposals in the amendment will mean another £380 million in a full year. Also the higher income surcharge relaxation will mean another £30 million. Therefore, we are talking about £780 million or £800 million worth of tax handouts, essentially to the wealthy members of our society.
What does this mean in terms of hospitals and schools? What does it mean


in terms of some of the demands that the Opposition were putting yesterday for increases in public expenditure?
If we take an individual on £25,000 a year, the Government's tax handouts will give him an extra £753·90 in a full year. This amount will come from the Government's own proposals, and assumes that that individual is married and his income is all earned. Under the proposals in the amendment, that individual will receive another £1,500 a year, making a total handout of £2,200 for a start.

Mr. Kilroy-Silk: Will my hon. Friend take account of the fact that whereas the Opposition amendment today would give £5,000 a year to the man on £50,000 a year, I have in my hand the pay receipt of a person from the industrial Civil Service, who is among those lobbying the House today? This man has had 20 years' service, yet his take-home pay is only £43 a week. This emphasises the point that my hon. Friend made, that the Conservative Party is a class party, concerned only with the wealthy and not with the kind of people who need the help of this House.

Mr. Thomas: I agree entirely. My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) has put into clear perspective the difference between the Conservatives and us. The Tories come to this most exclusive club in Europe to represent the wealthy sections of our society, and they care little for those who are lobbying this House this afternoon and who earn only £40 or £50 a week.
As I was saying, people on £25,000 a year will have benefited by some £753 from the Government's proposals and another £1,500 if this amendment is passed. There is also a very good chance that they can manipulate their capital gains. Because of the relaxation of capital gains tax, it would not be very difficult for them to get another £1,200 a year out of that. Because this is retrospective over last year as well, we are talking about a total handout of the order of £3,600 for a person on £25,000 a year, if he can take full advantage of the capital gains relaxation. More than half the manual workers in this country receive less than that every year in their pay packets.
In terms of handouts, the amendment that we are discussing affects those earning £10,000 a year plus, at the very least.

This cannot be emphasised enough. It is very easy to talk glibly about the £6,000, £7,000 and £8,000 bands, but it should be emphasised that these are the sums after all the allowances have been deducted. People who earn between £10,000 and £20,000 a year are able to make sure that their allowances are pretty high, whether they are for mortgages, insurance or anything else.
According to the Department of Employment new earnings survey for 1977—I know that certain wages and salaries have gone up since then—only 0·1 per cent. of those in manual occupations earned this kind of money. Only 1·8 per cent. of those in non-manual occupations earned this kind of money. The hon. Member for Cornwall, North (Mr. Pardoe) told us how many people in ICI were getting more than £200 a week. I have an ICI plant at Severnside, and I think that my workers would be very surprised to hear that. Perhaps the hon. Member for Cornwall, North should have a word with the Department of Employment and tell it that its survey is completely wrong. There are very few people in the £200-a-week plus bracket, yet that is the bracket that the Tories want to help.

Mr. Rooker: Will my hon. Friend reflect upon the fact that the information from the companies that is used to produce the survey figures is not transmitted to Government Departments by workers earning £50 a week? It is transmitted by those at the top end of the scale whose intention it may be to deceive the population about the extent of the high rates of pay.

Mr. Thomas: My hon. Friend, who has often quoted those figures, may be right.

Mr. Pardoe: indicated dissent.

Mr. Thomas: The hon. Gentleman shakes his head. Someone is wrong. Either the Department of Employment new earnings survey is wrong, or some Opposition Members have been misinformed. The survey, which I have here and which anyone can borrow from the Library, shows that this range of income includes some judges, barristers, solicitors, one or two accountants and, not surprisingly, tax consultants. But there are only between 0·1 per cent. and 0·5


per cent. of engineers, foremen, and all these other people that we are told are holding back because they are so highly taxed.
This list is a salutary lesson. It shows if we did not already know it, who it is that the Tory Party particularly wants to help. The right hon. and learned Member for Surrey, East told us that the only way to regenerate British industry is to call back Tom Jones and others and tell them that all is forgiven.
There is no evidence that under the last Tory Government their tax hand, outs led to these so-called innovative entrepreneurs rushing forward to regenerate British industry. With their handouts, they engaged in property, land and commodity speculation and invested overseas.

Mr. David Steel: Since the hon. Member has mentioned a pop singer, may I ask him to take it on board that there is considerable evidence that this country has lost a great deal of revenue in the recording field, not only from the individuals who are earning vast sums and who go overseas—

Mr. Arthur Lewis: We know all this.

Mr. Steel: I am asking the hon. Member for Bristol, North-West (Mr. Thomas).

Mr. Lewis: He has heard it.

Mr. Steel: He did not seem to have heard it.

Mr. Lewis: He did, though.

Mr. Steel: The hon. Member does not appear to have understood that the revenue lost is not only from the individuals but from the associated exports of records, which at the moment we are importing. That is the consequence of this policy.

Mr. Thomas: I do not think that there is any evidence to support that. All the pop singers in the world will say that if the tax were lower they would come back, but providing there is one country left where the tax is lower, that is where they will be.
I am surprised that the hon. Member for Cornwall, North is taken in by people

like Tom Jones and Engelbert Humperdinck, who say to him "If only the tax was a bit lower, I would come back to live in Britain."

Mr. Alan Clark: Does the hon. Member agree that this country has not yet fallen so low that it has to degrade itself by arguing questions of fiscal and economic policy on the basis of the question whether the revenue from the record industry is likely to increase or decrease?

Mr. Thomas: I entirely agree, but I suggest that the hon. Gentleman directs his question to his own Front Bench. For 20 minutes, the right hon. and learned Member for Surrey, East gaves us a list of examples of the people we were losing—these great innovators and entrepreneurs who would regenerate British industry with their pop record sales and so on if only this Labour Government did not tax them so heavily that they had to rush off to the United States or the Cayman Islands.

Mr. Arthur Lewis: Is my hon. Friend aware that one person mentioned by the right hon. and learned Gentleman has boasted that he has never paid tax anywhere, because he always arranges to stay one or two days within the limit before moving on to the next tax haven? If someone has enough money, he can do that.

5.15 p.m.

Mr. Thomas: I should like now to say something about the amendments in my name and those of my hon. Friends. We believe that even the Government proposals go too far in giving tax handouts to the more wealthy members of our society. I do not accept the argument that those on higher incomes have been affected by inflation in the same way as those on average earnings and below. I see no justification for our Government raising the threshold from £6,000 to £7,000 and making other adjustments at the higher levels.
I have already said that someone on £25,000 a year will get £750 from this Budget in any case, plus another £1,200 if he manipulates his capital gains, which will not be difficult for him. Last year, in reply to a Question by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), we learned that last year


the tax handout to someone earning £25,000 was about £800. That is about £1,500 over a couple of years, plus the £1,200 on capital gains.
If we intend to push up these tax bands by £1,000 every year to meet inflation, we shall still have the kind of distribution of after-tax income that we began with. That will be contrary to the Labour Party's manifesto, which talked of a "fundamental" shift in the balance of wealth and power. There has certainly been no shift in terms of power, and we can see no signs of a shift in terms of wealth. It seems that we are to have no wealth tax.
I am indebted to my hon. Friend the Member for Perry Barr for his Questions on this subject. The answer to another revealed that in April 1977 64·6 per cent. of the total tax relief was given to those earning more than £4,000. In July 1977, the proportion was down to 61·5 per cent. It is true that in this Budget the balance has shifted back a little in favour of those earning less than £4,500, but still 57 per cent. of the total tax handouts have gone to those earning more than £4,500, which is the average wage.
I am not as happy with the Budget as many of my hon. Friends are. Our manifesto was based on a "fundamental and irreversible shift" in the balance of wealth and power. That must include redistribution by way of taxation and a wealth tax, but there has been nothing like that approach in any Budget. Although some of my hon. Friends feel that shift has been slightly in favour of our arguments this time, and that they can support it, I urge as many of them as possible to oppose any more tax handouts in this Budget to the wealthy. We should keep the rate at which the higher level of tax is paid at £6,000 of taxable income, that is, after all allowances have been taken into account, instead of giving another £750, as the Government propose, to those on £25,000 a year and more.

Mr. Pardoe: The hon. Member for Bristol, North-West (Mr. Thomas) can always be relied upon, at the drop of a hat, to give us a caricature of our archetypal Left-wing speech on taxation. We always know what we shall get from him, and we have certainly had it this afternoon.
However, although one can discount that kind of argument for some Government Back Benchers, one cannot discount the ludicrous and totally hypocritical arguments advanced by the Minister of State. He knows that he does not believe a word that he uttered today about high rates of taxation. He knows that the Chancellor of the Exchequer does not agree with him, the Chancellor of the Duchy of Lancaster does not agree with him, the Chief Secretary does not agree with him, and the majority of his hon. Friends do not agree with him.
In any case, if the Minister is really saying that it is a monstrous piece of class legislation to increase from £7,000 to £8,000 the threshold at which higher rates of taxation come in, why was it not equally monstrous to increase the threshold from £6,000 to £7,000? Surely that put money into the pockets of these disgraceful rich people that the Labour Party is so intent on clobbering.
The Minister had to make that speech, because he had to bind up the wounds of his party and try, somehow, to get the TUC behind the Government. But we know that the Government believe that the top rates of tax are too high. It is not just the Chancellor of the Duchy of Lancaster who believes it. The Chancellor of the Exchequer believes it, too.
When the Chancellor of the Exchequer went to Glasgow at the beginning of this year, why did he say
We must lead the market instead of following it. This task, as always, will be primarily the task of alert and energetic entrepreneurs"?
Why does he believe that those alert and energetic entrepreneurs will be able to do the job? Why are they not undertaking it? Is it not something to do with our taxation system? The tax system stops such people from taking action. [HON MEMBERS: "Incentives."] I shall come to the question of incentives shortly.
If the hon. Member for Bristol, North-West believes that high tax is no disincentive, why not tax people at 100 per cent. on 100 per cent. of their income? Does he feel that that would be no disincentive to effort? And if we come down to 98 per cent. on 98 per cent. of income, is not that also a disincentive? Where does one reach the point where taxation is no disincentive at all?

Mr. Ron Thomas: Is the hon. Gentleman suggesting that the people on £10,000


per year plus are writing half a memorandum, attending half a meeting, or travelling half way to Europe and then turning back? What, precisely, are they doing?

Mr. Pardoe: There are a whole range of occupations in our economy where, at the margin, people can be deterred from doing more in various ways. That applies not only to industry; a classic example is that of a professor who has to decide whether to contribute an article to a learned journal.

Mr. Thomas: Come off it.

Mr. Pardoe: I said that I would give the hon. Gentleman a range of examples.

Hon. Members: Rubbish.

The Chairman: Order. It is quite impossible for the Chair to hear what the hon. Gentleman is saying.

Mr. Pardoe: I said that I would give a range of examples. The hon. Member asked for examples and he will get them, whether he likes them or not. I would have thought that he was the last person to despise the contribution of academics who give the public the benefit of their thinking.
Let us take the case of an academic who must make a decision whether to spend the weekend writing up the results of his research or spend the time decorating his house. He knows that if he writes up the results of that research he will get another £500, or whatever it may be, but he may have to pay 70p in the pound on it, whereas if he pays somebody to decorate his house he will have to pay for it out of taxed income. Clearly, he will decide to paint his house rather than do a job from which society would gain far more benefit.

Mr. Powell: I assure the hon. Gentleman that his first example is totally unrealistic and does not correspond to any motivation of which I have ever been aware in the academic profession.

Mr. Pardoe: That absolutely proves my point. Until, rather late in life, the right hon. Gentleman became interested in economics, he was in the classical faculty. It may well be that classical professors do not automatically think of the

economic facts of life, but I assure the right hon. Gentleman that many of us know of specific cases, admittedly in the sciences or economics departments—where that kind of calculation is carried out. It is nonsensical to suggest that that does not happen.
Let me give another example. Let us take the position of an export executive who is on a bonus scheme, as many of them are. He knows that if he takes an aircraft to the uttermost ends of the earth over the weekend he may sign a contract to make some exports. He must decide whether, at 70 per cent. taxation or whatever the figure may be, the money that will be left to him as a result of the additional bonus for that export order is worth giving up four or five days with the family and the kids. Is it not better to pick up the phone and tell his secretary "Do not book the plane, but book a table for two for my wife and me at the golf club at the weekend"? Labour Members do not understand the work-creating process at this level of industry. They have never created a penny of wealth in the whole of their lives, and never will. The only thing they do is to draw wealth from the rest of us.

Mr. John Mendelson: Perhaps I may try to help the hon. Gentleman. I do not know whether he was a Member of this House at the time when my right hon. Friend the Member for Huyton (Sir H. Wilson) once stopped a Budget debate in its tracks—a debate that was not properly continued—when the then Chancellor, Mr. Selwyn Lloyd as he then was, introduced a proposal to cut the rate on the highest income groups. The same argument was then used, namely, that the proposal would immediately put new energy into the veins of stockbrokers. My right hon. Friend said "Of course, one will now see a revolutionary change. The whole of the stockbroker belt in Surrey, instead of coming to the City on the 8·14, will in future come in on the 7·12." The hon. Gentleman gave an example about a professor writing an article because he would receive another £200. That was said by a Liberal spokesman who prides himself on speaking for the middle income group. Is that being put forward as a serious argument in this debate? We know the trickster who is proposing a Budget for those who are financed—

The Chairman: Order. The hon. Member for Penistone (Mr. Mendelson), with his long experience, knows that the expression that he has just used is not a parliamentary one, and I ask him to withdraw it.

Mr. Mendelson: With respect, Mr. Murton, the term "trickster" is not an unparliamentary expression and it characterises—

The Chairman: Order. I must contradict the hon. Gentleman. If I say that it is an unparliamentary expression, it is an unparliamentary expression. I hope that the hon. Gentleman, with his customary courtesy, will take my point and withdraw that expression.

Mr. Mendelson: With respect, Mr. Murton, we had an example only last week of an hon. Member who was persuaded to withdraw, although he had used an expression that was perfectly parliamentary. My right hon. Friend the Member for Fulham (Mr. Stewart) later pointed out that the hon. Member concerned was well within his rights. I am well within my rights. This is a financiers' proposal made by tricksters who want to mislead the electorate.

The Chairman: Order. Let me get the matter quite clear. Was the hon. Gentleman referring to another hon. Member of this House, or was he using the expression as a generic term?

Mr. Mendelson: I was using it as a collective term for those who would benefit by these proposals.

The Chairman: In that case, I accept what the hon. Gentleman says, but if, while I am in the Chair, that expression is used about another hon. Member specifically, it will have to be withdrawn.

Mr. Alexander W. Lyon: If the cap fits.

Sir G. Howe: On a point of order, Mr. Murton. The language and style of the hon. Member for Penistone (Mr. Mendelson) hardly deserve serious attention, but it is quite clearly within my recollection that the first time he used the expression that you ruled as unparliamentary he pointed to me and spoke of the trickster who moved the amendment before the House. Since you have ruled, Mr. Murton, that that is an un-

parliamentary expression, I think that you are entitled to ask him to withdraw it.

The Chairman: Does the hon. Gentleman still maintain that that remark was not made in respect of an hon. Member?

Mr. Mendelson: Certainly not. It was not.

Mr. Powell: Further to that point of order, Mr. Murton. May I respectfully inquire of you whether your ruling in this case is covered by precedent? I think that you will accept that that which is parliamentary or unparliamentary is determined by precedent and that the precedent is binding on the Chair. I ask the question not in order to challenge your ruling but for the clarification of the ruling which you are giving to the House.

The Chairman: I can reassure the right hon. Gentleman that the list given in "Erskine May" is not exhaustive. On the other hand, any comment made about another hon. Member, within the terms in which it is made, is for the Chair to decide on. The question of precedent in that case does not arise.

Mr. Mendelson: I object to our being restricted in characterising proposals. The right hon. and learned Member for Surrey, East (Sir G. Howe) was not even the first to interrupt me. If I want to refer to the right hon. and learned Gentleman, he knows that I will do it without fear or favour. I have done so in the past. I was characterising a class of people who will benefit by these proposals.

5.30 p.m.

Mr. Pardoe: I hope that you will not add up these minutes and hold them against me, Mr. Murton.
Perhaps we can now get away from this kind of verbiage and shouting across the Chamber. It seems to me extraordinary that the Minister of State should make the kind of speech that he has made when, if we look at the figures that the Government have already proposed, we can see that, for instance, someone with £7,000 taxable income will receive, as a result of the Government's proposals, an extra £128 a year; somebody at £10,000 will receive an extra £278 a year; somebody at £17,500 an extra £528; and somebody at over £23,000 an extra £668.
The Government must surely believe that that money will do some good. Why else have they given it away—to use the term that they would use? Why have they made these concessions? If they do not believe that it has any effect on incentives and the economy, why did they not increase the top rate of tax from 83 per cent. to 100 per cent.?

Mr. Denzil Davies: I think that the hon. Gentleman misunderstood my argument. I never said that it was not necessary to relieve the burden of tax on this group. I pointed out the figures that he has mentioned. My point was that the proposals in the amendment, which, unhappily, the Liberal Party seems keen on supporting, went far beyond the bounds of equity and justice, taking all priorities into account.

Mr. Pardoe: So it is simply a question of degree between us. What the Government have done in giving £668 a year to those top people is perfectly fair and sensible and is an incentive, but what the Opposition propose to do is disgraceful and unfair and class-ridden, and all the rest of the verbiage that we have had from the Labour Party. It is absolute nonsense. The right hon. Gentleman knows it.
What really sticks in my throat about this is that the right hon. Gentleman made the kind of speech that he did when his boss, the Chancellor of the Exchequer, wanders round the dining clubs of the City telling every stockbroker or merchant banker who will listen about the terrible top rates of tax that those people are affected by and rehearsing all the arguments that the right hon. and learned Member for Surrey, East (Sir G. Howe) used this afternoon and I have been using up to now. The Chancellor agrees with every word of the amendments. So does the right hon. Gentleman, and so do many of those behind him. The Government do, except for half a dozen people in the Cabinet. The right hon. Gentleman knows it perfectly well, and it is nonsensical to deny it.
We are dealing with a group of amendments about those—we make no apology for this—in the upper income groups. It is true, and I accept immediately, that it is a small number of people, however one defines it.

Mr. John Mendelson: Rentiers, financiers.

Mr. Pardoe: However one defines middle managers, however one defines the upper income earners, this group is a minority of people. Those people paying over the standard rate this year will number around 850,000. Those are really the people whom we are considering. They are a minority, but is the Labour Party really advancing the view that minorities do not matter—that one does not have to consider minorities at all? Surely that is not the view of the Labour Party.
We are dealing with a minority, and we recognise immediately that there is no vast number of votes in the matter. Nobody is putting forward the amendment because he thinks that there is a huge body of votes in it for him. Certainly, that is not the view of the Liberal Party. What we believe is that the tax system as a whole needs to be reformed from top to bottom, and this is a part of the reform that we have advocated.
The Minister of State said that he was surprised that we were following the Conservatives into the Lobby. It is not a question of that. He knows perfectly well that we announced the amendments long before they did. I am not making a point about that, as to who was first. The fact is that we had the same amendments down on the original Notice Paper. Therefore, the right hon. Gentleman need not be surprised that we are following the Conservatives into the Lobby on this matter. Presumably we are both doing what we believe is right, for our own reasons.
Why do the people with whom we are here concerned matter? Why does it make good political sense to reduce the top rates of tax? I say "political sense", because I believe that it does make good political sense. I shall take the second question first.
It seems to be believed by some of the Labour Members who are here this afternoon, that Britain is an envious nation, that there are votes to be obtained in envy and whipping up envy about top paid people. The fact is that out "in the sticks" people are not that envious about top paid people. I represent a very low income area. I do not find council tenants tearing their hair out over the fact that somebody can afford to live in a better style of house or own a better


car than they do. This kind of envy does not exist.
A survey on the Budget was fairly recently carried out by MORI. I am sure that Labour Members will have read it, because it says some rather nice things about the Budget. People were asked whether they agreed or disagreed with the following view:
Higher paid people pay so much income tax that there is no incentive for them to work harder.
Seventy-three per cent. of the British people agreed. That does not indicate an envious people. It does not indicate to me that they are weighed down with a feeling that the so-and-sos jolly well ought to pay that rate of tax. It indicates to me that they are somewhat sympathetic to the idea that the top rates of tax are too high.

Mr. John Mendelson: They are earning £80 a week, not £50,000 a year.

Mr. Pardoe: People earning £80 a week are not paying the top rates of tax, as the hon. Gentleman will no doubt know.
Even in the D/E social class, 68 per cent. agreed with that statement. Even 70 per cent. of trade unionists agreed with it. Even, incredibly, 65 per cent. of Labour Party supporters agreed with it.
Why do we have these high rates of tax? Why have they been imposed? We have the highest rates of tax for central Government of any industrial country in the world. If we compare this country with the other major countries we find that in France, for instance, the rate is 60 per cent. over £13,000, but the French split income between family units, so one can multiply the £13,000 by the number of people in the family and have a much higher threshold than that at which we have our top rate. In Germany, the top rate is 56 per cent. over £32,000, and for married couples it is over £65,000. In the United States, it is 50 per cent. over £51,000.
I am aware that those are so-called federal or central Government rates. In Sweden, for example, local income tax is very high. But the rates are very high in this country upon such people's dwellings. Although they do not entirely compensate for the local income tax, a comparison of total tax rates, local and national, between this country and the

rest of the world shows that we are well above the great majority of our major industrial competitors.
I shall not quote the facts, but if Labour Members want them they can at least have the reference. Employment Conditions Abroad Limited published "International Comparisons of Direct Personal Taxation" last month. It gives a whole series of facts and figures, which Labour Members might do well to read. I do not suppose that they will be convinced. They are beyond being convinced, but they might at least enter into the argument.
Presumably the top rates of tax have been brought in partly because of envy, partly because of the class war, but mainly because we must raise so much revenue from income tax for the Government's purposes that we have had to tax people at the very low level very highly.

Mr. Mendelson: The hon. Gentleman wants to shift the burden to the poor. That is new Liberal policy.

Mr. Pardoe: There is no question of shifting it to the poor, as the hon. Gentleman must know.
The answer of Labour politicians to the question "Why do you tax the poor so highly?" is "Because we tax the rich even higher." That is the main political reason for these high rates of tax. The right hon. and learned Member for Surrey, East, in his speech this afternoon, did not appear to recognise sufficiently that there is a very considerable political and social problem involved in reducing these top rates of tax. It is interesting that the Conservative amendment is for a 70 per cent. top rate, but the last Conservative Government was only able to get it down to 75 per cent., which is well above the international going rate. They found it extremely difficult to do this, and I do not quite know why they think that it is so easy to do it today. This is where I part company from the right hon. and learned Gentleman, who does not seem to recognise sufficiently the political and social consequences involved.
As Labour Members have indicated, some people will get very high after-tax increases in income as a result of what is proposed; nevertheless the right hon. and learned Gentleman and I believe that it must be done. How should it be done?


I think it should be done by a clear statement of where we want to be in taxation over a period of years. We need to convince people at every level of income that our proposals for the reform of taxation will be good for them. It is not good enough simply to say to people at the low levels of income "We have to do this for the people at the top for economic reasons." Clearly, we have to raise the tax threshold over three years substantially above the supplementary benefit level, so that we can make income tax a tax for middle income groups and upper income groups, which is what it ought to be. It ought never to have been a tax on the incomes of the lower paid.
Then we need to introduce a credit income tax which will give real security and a genuine equality to the tax system. We need to reduce the basic rate of tax and ought to be aiming at something between 20 per cent. and 25 per cent. over three years. We also need to reduce the top rates, as we are seeking to do today.
I believe that it is absolutely crazy—President Carter said the same thing a few months ago—to tax people on their earned income at more than half. Everyone is entitled to keep half of what he earns. If we want to tax people in other ways, well and good. Let us have a graduated expenditure tax. Let us have a general expenditure tax à la Meade Committee at the top rates, or something of that sort. Without doing those things, I do not believe that a Conservative Government or any other sort of Government will be able to make the necessary changes, because the political consequences will be too great.
The right hon. and learned Gentleman castigated the Government for their supposed belief in a wealth tax. My problem is that the Government do not believe in a wealth tax. I wish they did. The whole point of a wealth tax is that it would provide the political and social quid pro quo for dealing with the problem of incomes. We have possibly gone too far in trying to equalise incomes, and we should introduce a reform of our capital taxation in order to redistribute wealth, rather than to redistribute income.
I accept to a certain extent the point made earlier that there can be an argu-

ment both ways as to the effect on high income earners of high levels of taxation. Alexander Hamilton once noted, in a Treasury paper, that native Americans appeared to be less zealous than newly arrived immigrants, and argued for a tax upon his countrymen to get them to work harder, but I do not think that such an argument would stand up today.
5.45 p.m.
My belief is that the present levels of income tax are a substantial disincentive to effort, to wealth creation, and to the enterprise that the Government say they wish to introduce and encourage.
The right hon. and learned Gentleman was absolutely right to labour the point about the "taxiles"—the tax exiles. It is not just the pop industry, as he knows and appreciates; it is an increasing array of business men and professional men. They are able, partly through the mobility of labour in the Common Market, to go abroad.
We have in Britain probably some of the highest tax incentives for industry or corporations to come here of any industrial country in the world, but we have so many disincentives to the people who manage that industry that they are staying away for personal reasons and our own top managers are leaving. It is happening all the time.
The one reason that Labour Members do not accept this point—and even some Opposition Members, including the right hon. Member for Down, South (Mr. Powell)—is that most of us in politics gain our satisfaction from the job we do rather than from the wealth or money we make. But outside this House, the people who have the job of running industry and taking the responsibility for it, have to get their satisfaction from making money, from the financial rewards of the job [HON. MEMBERS: "Oh."] If Labour Members think that there is anything wrong with making money, that is very strange. I understood them to want economic growth as much as anyone in this House, and if we are going for that we have to have people who will take the responsibility for running the big enterprises, whether nationalised, as they would like them to be, or private enterprises as we would have them on the Opposition side. The rewards ought to be considerable, at the present top levels


of income tax they are simply not sufficient. That is why we are losing people. There is, indeed, a substantial disincentive to wealth creation.
I believe that Amendment No. 7, which is really aiming at the middle managers, is the most important amendment of the group. Nevertheless, I still think that for this country to labour under a top rate of tax of 83 per cent.—even though we know that it is hedged around with a range of allowances—is wrong. It is absolutely crazy to have that rate quoted against us in the markets of the world, particularly when we remember that those top rates of tax bring in so little money to the Exchequer.
The time has come to make the change, and we had better make it tonight.

Mr. Kilroy-Silk: I knew that the hon. Member for Cornwall, North (Mr. Pardoe) was arrogant, but I did not know that he went as far as claiming the title of "saint". He said, in effect, that only Members of this House are motivated by other factors than money. He said that people outside this House had to have the incentive of money in order to do their job properly. There are, I assure the hon. Gentleman, many people in industry and in other occupations who get as much job satisfaction as he does, and as much as I am lucky to get. They get it from making a company work effectively and successfully, from exports, and from helping other people. They are not motivated solely and singly—as all Opposition Members seem to be—by the pursuit of money and the pursuit of profit. Perhaps there are occasional honourable exceptions, such as some of the Welsh nationalists.
The hon. Gentleman—who now speaks as part of the apparent Lib-Tory pact—also talked about envy and class warfare. There is no envy on the Labour Benches. What we are talking about is justice and fairness. I am rather surprised that the hon. Gentleman should suggest that it is just and fair or in any way equitable to give—as he is suggesting the House should tonight—an extra £5,000 a year tax relief to a man who is already earning £50,000 a year, while at the same time another man who comes to this House as part of a deputation has a take-home pay of £43 a week.
If the amendments moved by the Conservative Party—and supported by the Liberals—are successful, there will be a tax handout to those at the top end of the scale that will be more than the constituent to whom I have just referred earns in two years. That, I believe, is totally improper and unjust. We are talking about justice, not envy.
As for class warfare, it has been amply demonstrated by the Opposition because every element of their amendments to the Budget has been aimed at benefiting the better-off. It happened with the penny off on Monday night, when the greatest benefit of that tax handout went to those earning £170 or more a week. If the amendment is successful tonight, the handouts now anticipated are as follows. A man earning £15,000 a year will be given £500. A man on £25,000 a year will get an extra £1,500 and a man on £50,000 a year will get an extra £5,000. That is over and above the tax benefits which they have already received in the Budget measures announced by the Chancellor.
We have not heard a word from the Conservative Opposition about the disadvantaged, the disabled, the deprived or the unemployed. All we have heard is talk about the higher taxpayers and the need to reduce tax levels in that regard. The Conservative Opposition have clearly demonstrated that they are indeed the party of a very select, secretive and sectional class interest. If we are talking about class warfare, the class warfare has clearly been coming from the Opposition side of the Committee.

Mr. John Stokes: If the Conservative Party is only a party of a tiny minority, how is it that it has won so many local elections and has been winning the by-elections?

Mr. Kilroy-Silk: That has not been the case in my area. But I did not say that the hon. Gentleman's party was a minority party. I said that it represented a minority sectional interest. That has always been the case. Certainly any objective member of the public who has attended the Finance Bill Committee will see there, in all its naked glory, the Tory Party as the class party of the sectional interests which happen to be the wealthiest and most privileged interests in society. When we look at the Conservative


amendments we see that they are all in favour of those who earn more than £10,000 a year. The major benefits go to people on £50,000 a year. Why did not the Conservative Party table amendments that would benefit the low-paid? Why are there no amendments to help that section of the community?
What I find really extraordinary is that an alleged Shadow Chancellor of the Exchequer should make as the centre-piece of his argument a plea for the hoi polloi, odd-bod pop stars and all the rest, such as the Bugners and the Hunts. The right hon. and learned Member for Surrey. East (Sir G. Howe) produced a whole list of names of people who had allegedly left this country because they were having to pay too much tax. As his hon. Friend the Member for Plymouth, Sutton (Mr. Clark) pointed out, it seems to be an extraordinary principle that we should be framing our tax system and our Budget system simply in order to seduce certain individuals who show so little love for their own country that they are prepared to betray it for a higher amount of money which they can get elsewhere.
The Conservative Opposition are acting like pop stars' groupies. That is perhaps another new dimension to the Conservative Party. To talk about changes in our taxation system and in the Budget measures simply in order to help a variety of pop stars, racing drivers, sportsmen, actors and actresses, seems to me to demean the whole principle of the Budget and to demean the many thousands of people in this country who are unemployed. Many thousands in my own constituency, in Kirkby and Ormskirk, would regard it as a privilege to have the right and ability to pay tax, yet the right hon. and learned Gentleman makes a most pious speech in defence of those who are already earning hundreds of thousands of pounds, who already have far more, in terms of material possessions that one could wish for—houses, cars and other consumer durables—but who are complaining because they cannot be a little richer than they already are.
There are 1½ million people in this country who do not have the privilege of paying tax and who would give their right hands to be able to have a job and to contribute towards the running of this country. But the tax cuts are designed

not to help any of the more unfortunate members of the community, such as the unemployed; they are designed to help the better off They will not help to create employment. They certainly will not help the very poor or the low-paid. They will not help the pensioners or the disabled. They certainly will not help to revive industry or employment prospects in my constituency. They will not even help to stimulate jobs, because we know that one-third of the money that is actually handed back in the form of tax cuts goes on imports.
Tonight the Conservative Opposition are doing exactly what they proposed to do with North Sea oil revenues. They want to hard the whole thing over in a great tax bonanza, a great popular gesture, the effect of which could be to benefit most of our major international competitors. We all know that about one-third of all the money that goes in tax cuts goes to the sucking in of imports.
What we should really be talking about is the devoting of far more of our resources to increased public expenditure, which would directly create more jobs. If Conservative Members are really concerned about employment, that is the way they can deal with it, certainly in areas such as my own, on Merseyside. We could use very effectively the £780 million that the Conservative Party wishes to hand over to the wealthier members of our community.
Only one and a half years ago we had the Chancellor of the Exchequer telling the House that as a condition of getting a loan from the IMF we would have to cut essential social services and public expenditure by £1,000 million. He said that we would have to make major sacrifices, and that the quantity and quality of our welfare and social services would have to decline. Yet the Conservative Party tonight is virtually handing three-quarters of that amount not to the population at large, not to the low-paid, the poor or those on low incomes, but to those who are already wealthy, many of them inordinately wealthy—wealthy beyond the dreams of most ordinary people on average earnings and incomes. That is an extraordinary situation.
We could easily swallow up a good portion of that £780 million on improving the public services in Kirkby. We could use it to improve housing and the


environment, which would help to improve the community itself. It would also have a direct relationship to the creation of jobs in the largely depressed construction industry.

Mr. Rooker: Does my hon. Friend accept that one of the reasons why the hon. Member for Cornwall, North (Mr. Pardoe) was able to quote from what I consider to be a rigged public opinion survey was that his constituents and my constituents do not believe, and cannot comprehend, the levels of earnings required to pay such high rates of tax in the first place?

Mr. Kilroy-Silk: My hon. Friend is quite right. When they answered the questions put to them in that survey those people were, in fact saying "Yes, we do believe that the man on £50, £60 or £80 a week is over-taxed". I am sure they never imagined that a Liberal spokesman would defend people who were earning £50,000 a year and would seek to give them an extra £5,000 a year. That sort of salary is beyond their dreams. Ordinary people really do not believe that these things exist. That is the kind of attitude which we expect from the Conservative Party. It is not the kind of attitude we expect from the Liberal Party. Perhaps the hon. Member for Rochdale (Mr. Smith) will tell us that not all Liberals are like the hon. Member for Cornwall, North. It was noticeable that no other Liberal Member was in the Chamber to support the hon. Gentleman tonight in his valiant and, perhaps, ultimately successful attempt to form this new seductive alliance between the Conservatives and the Liberals.
The hon. Member for Cornwall, North, like those in the Conservative Party, is not content with giving tax cuts and major handouts to the better-off members of our community. The hon. Gentleman, like the Tories, is not content with ignoring the plight of the disadvantaged, although he and others may well put their hands on their hearts and complain about their position when they visit other constituencies. It is on those occasions that they are concerned about the plight of the unemployed or the disadvantaged members of our community, those who are often talked about in the Chamber by the hon. Member for Rochdale.
6.0 p.m.
The Tories, not content with giving tax reliefs to the wealthier and better-off members of our community, want to go further in their prosecution of the class war. They want to impose even further disadvantages on the low-paid, the pensioners and the disabled by changing the burden of taxation, shifting it away from income tax and placing it on indirect taxation. They are not content with giving more money to the rich; they want to ensure that the pensioners, the unemployed and many of those who do not even reach the tax bracket will find a larger proportion of their income going in tax because of increases in value added tax.
I hope that my right hon Friend the Minister of State, will resist the strong pressures being put upon him and the Government by the Opposition, by some of my hon. Friends and by the media to change the emphasis from income tax to indirect taxation. He knows, as I know, that those who are hurt hardest by increases in indirect taxation are those who are most vulnerable and who can least afford to pay.
It is not surprising that Tory Members should propose a switch in taxation from income tax to indirect taxation. However, I find it surprising that the hon. Member for Cornwall, North, who generally sees himself as a robust radical, should suddenly turn out to be a champion of the class war which has generally been prosecuted, not very effectively as it happens, by the Conservative Party.
I ask my right hon. Friend to resist any imposition of further indirect taxation, which would hit those whom I and many of my hon. Friends represent. These are the people who never come anywhere near £50,000 a year, who may never even dream of that sort of money. Many of them are in the single-parent family category. There are many thousands who are unemployed. These are the people who would feel deeply the effect of increases in value added tax. It would hurt them far more severely than those who are being talked about by the Opposition, because any such increases would represent a larger proportion of their income.
I make a far more confident and robust defence of the present levels of taxation. Like many of my hon. Friends,


I accept that the income tax level at the margin should be changed, bearing in mind the incomes of many of our constituents. Many of those whom we regard as having low incomes come into the tax net. We regard that as indefensible. However, that should not lead us to decry the general level of taxation and to assert that it should be reduced.
If we take that approach, we forget many of the features that make this country what it is and make it a desirable, compassionate, tolerant and humane society. I refer to the various undertakings that are being built and financed from taxation. For example, there are the National Health Service, the education service, the police, law and order—of course, we hear a great deal about the police and law and order from Opposition Members—and many of the other activities and parts of life that are financed from taxation. These factors are extremely important to those whom I represent. They are important to the whole quality, ethos and tenor of the society in which we live.
It is extremely important that we do not give in to the clamour to reduce taxation to a level that would have a deleterious effect upon the level, quality and quantity of the social welfare services that we provide. We see the hypocrisy that is exhibited every day of the week by some Opposition hon. Members, including the hon. Member for Horn-castle (Mr. Tapsell), who on 21st February said that he was in favour of increased public expenditure. When talking about public expenditure, many Opposition Members are prepared to say that they want generally to reduce it so that taxation may be reduced. That is popular and it sounds possible.
Every individual knows what we mean when we talk about reducing income tax. He will feel that in his pocket. However, he does not know what we mean when we talk about reducing public expenditure. It is only when the result hits him that he becomes concerned about public expenditure. He becomes concerned when he has to wait in a long hospital queue, when he has to spend two or three hours in a casualty department, when the police do not come round when he reports a crime or an act of vandalism, when the fire brigade does not turn up in time,

when the hospital is not built or becomes inadequate and when the schools are overcrowded. When those situation arise, he suddenly realises what public expenditure is all about. The individual citizen realises that, and so does every Conservative Member.
Although Conservative Members say that generally they want to cut public expenditure, they are prepared to say in the House—they do it day after day, and they did it during Question Time today when putting Questions to my right hon. Friend the Secretary of State for the Environment—"Please may we have more public expenditure? Please will you build a hospital in my constituency?" It is always in the individual Member's constituency and nowhere else. They say "Please will you build the road? Please spend more on law and order. Please spend more on defence."
That is the sort of hypocrisy that we expect and get from Conservative Members. It is not the sort of hypocrisy that we have ever had or anticipated from Liberal Members.

Mr. Stan Thorne: My hon. Friend is too generous.

Mr. Kilroy-Silk: I know that my hon. Friend's experience is different from mine. I know that he fights the Liberals hard in Liverpool.

Mr. Thorne: I do not represent a Liverpool constituency.

Mr. Kilroy-Silk: I know that my hon. Friend lives in Liverpool.
I did not think that I would come across such hypocrisy from a Liberal Member.

Mr. Pardoe: The hon. Gentleman must not accuse me of trying to finance the cuts by making cuts in public spending. I do not believe that the cuts should be financed by cuts in public spending. I have said on many occasions in the House that they should be brought about by increasing taxes on spending. More than two-thirds of the hon. Gentleman's constituents would prefer to pay tax as they spend than pay tax as they earn. Why does he not ask them for a start?

Mr. Kilroy-Silk: The hon. Gentleman says that two-thirds of my constituents would prefer to pay lower taxes. I do


not know where he gets that information. Let me make it clear that 58 per cent. of the council house tenants in my constituency are on social security. They are not paying tax. They will not benefit from any tax cuts. They will not benefit from the tax cuts that the Opposition parties wish to be made tonight. Of the schoolchildren in my constituency, 80 per cent. receive free school meals, while the national average is about 18 per cent.
Do not let the hon. Gentleman tell me what my constituents think. Do not tell me about my constituents. I know what they think. I know what they want. What they do not want is to see the Tory Opposition, helped by the Liberal Party, give money away to those who already have too much. They do not want to hear a Liberal spokesman saying that he will support the Tories to introduce measures to tax the poor. That is what the hon. Gentleman is proposing by arguing that there should be an increase in value added tax. My constituents would not gain from such an increase. They will not benefit by cuts of 1p or whatever in the rate of income tax, but they would be hurt severely by the increase in value added tax that is proposed by the hon. Gentleman.
I ask my right hon. Friend to resist the proposals of the Opposition parties and the implicit attack on our social services by the Tories. They would give £800 million to the rich, but they would be asking my constituents to pay for that by introducing increases in council house rents, increases in the price of school meals to affect the few, admittedly, who have to pay and by increases in a whole range of other social services.
The Tory Party is showing its clear, true colours as a party that represents a select, sectional interest of the wealthy. It is propagating the class war in a way that it has never done so openly in the House. I ask my right hon. Friend to resist the amendment.

Mr. Ian Stewart: If the hon. Member for Ormskirk (Mr. Kilroy-Silk) is typical of the people from the area that he represents, it is not surprising that they have frightened off every employer in sight. I have rarely heard such a ridiculous load of balderdash intended as a contribution to a debate in Committee or on the Floor of the House.

I think that it would help the Committee if we were to try to discuss this matter rationally. It is a great pity that the Minister of State allowed himself to be carried away by the sentiments of Labour Members below the Gangway.

Mr. John Mendelson: My right hon. Friend made an excellent speech. We have not heard a speech such as that in years.

Mr. Stewart: Therefore, he was forced, against his better nature, which I know well, to make a belligerent and irrelevant speech, which is what he does only when he does not believe in the argument that he is putting forward.
Why are these amendments being resisted by the Government?

Mr. Mendelson: Why?

Mr. Stewart: I should have thought that it was clear after the rubbish to which we have had to listen about every subject except the amendments. Why have the Government—

Mr. Mendelson: Why?

Mr. Stewart: —gone against their better judgment that moves in this direction should now be made? Of course it is a matter of the class war, but it is an absolutely bogus class war whipped up by the bovver boys of the Red Brigade below the Gangway.
We have heard a great deal this evening, as we often do in such debates, about fairness and justice, rich and poor. But we are talking not about wealth but about earnings.

Mr. Mendelson: We are talking only about money.

Mr. Stewart: Labour Members, who think that they know all about these things—

Mr. Mendelson: Hear, hear.

Mr. Stewart: —are determined to misunderstand the point of what we are discussing tonight. It is largely because of this ridiculous and unthinking attitude that the Committee is treated on these occasions to displays of disreputable behaviour.
We hear a lot about handouts and favours to the rich and so on, but is it a


favour to somebody to take away less than 83 per cent. of £1 which he earns? Is it a handout to impose a rate of tax lower than what amounts to confiscation? Labour Members are entitled to their own opinions. However, I suggest that they are in a minority, not only in their own party and in, the Committee but in the country at large. Fortunately, most people do not believe in confiscatory rates of personal taxation. I was glad to hear the hon. Member for Cornwall, North (Mr. Pardoe), in a reasonable way, explain that the Liberal Party had a similar view to that which, I suspect, is widely held throughout the country.
What happens if every year we use the argument that we have heard from the Labour Benches today? If differentials are always squeezed in the same direction, they will eventually disappear. If it is never right to restore the real levels of after-tax earnings at the higher rates and it is always the top priority to increase relatively the spending power at the other end of the scale, inevitably differentials will be squeezed. They will be squeezed not only by the tax system but by incomes policies which include flat-rate elements which, combined with the effect of inflation, cause the problems which we now have about differentials which are recognised by the Prime Minister, the Government and many Labour Members. But what do they do about it? They do very little. The population has suffered a decline in living standards over the last five years.

Mr. Mendelson: On a point of order, Mr. Murton. I ask for your guidance. Is it not wasting the time of the Committee to talk about wage differentials and to pray in aid the Prime Minister when we are talking about handouts of £5,000 a year to rentiers and financiers? This is a waste of the time of the Committee.

The Chairman: Order. That is not a point of order. The hon. Gentleman must be allowed to develop his argument in his own way.

Mr. Stewart: Thank you, Mr. Murton. The average reduction in real earnings at the bottom end of the scale has been calculated over the last five years, after tax and with adjustments for national insurance, social security and child benefit, to be about 3 per cent. At three times

average earnings it is about 14 per cent. At the levels affected by the amendments, in some cases it is 25 per cent. or 30 per cent.
That may be acceptable to Labour Members. It may be what they wish. It is a strong form of egalitarianism served up under the guise of inflation. If they want that kind of society, that is fair enough, but I do not believe that the Government should pretend that they are worried about the situation and then resist the amendments.
Amendment No. 22, in my name, would cost very little. It would merely adjust the top rate of tax from 83 per cent. to 70 per cent. That would still leave this country as one of the highest-taxed countries in Europe and the industrial world. I should have thought that, if Treasury Ministers were seriously concerned about the disincentive effects of our high marginal rates of taxation, they would willingly accept the amendment without a Division. But I do not expect that they will. Unfortunately, the belated recognition by some Members of the Cabinet—most notably the Chancellor of the Duchy of Lancaster—that this situation is now overdue for correction has not prevailed in the Cabinet. That is a matter for disgrace.
6.15 p.m.
If a country sets out to use its tax system to penalise the able, the skilled, the hardworking and the successful, inevitably it will end up unskilled, mediocre, idle and unsuccessful. Unfortunately, that bears a marked resemblance to what is beginning to happen in Britain today.
No one is suggesting that altering the higher rates would bring about an immediate regeneration of British industry and commercial life. But I think that all who look at this matter objectively agree that, if we leave the rates where they are, we shall certainly bring about a further slide in the opposite direction. I echo the words of the Chancellor of the Duchy of Lancaster that this situation is overdue for correction.

Mr. William Hamilton: I take a middle-of-the-way view on these matters. I hope that my hon. Friends in the Tribune Group will not be surprised when I say that I disagree with their views. I also disagree with the views of the Tory Opposition.
I think that the Government's view on the Budget was just about the right balance, given the present economic situation. But there can be no doubt in the minds of most moderate Members—I count myself as one of them—that there is something radically wrong with our tax system from the top to the bottom. It will not be undone overnight. The steps that have been taken in successive Budgets by my right hon. Friend seem to us, and I think to the country as a whole, to be eminently fair, but, they do not solve the problem.
When I consider the speech made by the right hon. and learned Member for Surrey, East (Sir G. Howe) and couple it with the repeated remarks of the Leader of the Opposition, I conclude that they are not the best of advocates for suggesting a reform of the tax system because, rightly or wrongly, the Tory Party always gives the impression that it is concerned more with the people at the top than with the people at the bottom. Indeed, Conservative spokesman have said so in as many words. When they say, as they have said repeatedly, that these tax concessions can be paid for by slashing unspecified items of public expenditure—unspecified today, too—there can be no doubt that such cuts will affect most severely the poor and, indeed, the middle classes, because it is they who benefit most from the social services, whether in education, the National Health Service or whatever.
In February, the Leader of the Opposition said that the Conservative Party was determined to axe tax, presumably to release energy. We have heard all these expressions before. Indeed, I have heard many similar debates over a number of years. It is said that these tax concessions at the top end of the scale will release energy, inspire initiative, stop the brain drain and all the rest of it. I say from my own experience that the people who find the tax system a greater disincentive than most are not top managers and professional people but the skilled workers at the bench and the semi-skilled workers who say that it is not worth working two hours' overtime because they are taxed on it. These are the people who need more incentive than people at the top. They are doing extremely boring and repetitive jobs. It is not worth

while having two more hours of that when the Chancellor takes a big slice of it.
On the other hand, the professional man has a good deal of job satisfaction. For example, I am speaking with a heavy cold. I have no financial incentive to come here. I happen to like coming here because I like the job. We are all like that, otherwise we should not be here. The same applies to many professional people—even nurses. Nobody could say that the nurse in a hospital is induced by extra pay. She is motivated by other considerations.
This is where we make repeated mistakes, and particularly the Tory Party. Tories give the impression that only cash motivates people in their activities. I do not say that it is irrelevant, but it is only one factor. Usually it is not the most important factor, but when it is it applies at the lower income scale rather than at the top in the professional classes. Tories use these arguments simply because they believe that there is a certain amount of political mileage to be had from them.
The most absurd statements were made by the right hon. and learned Member for Surrey, East. He gave a long list, not of the brain drain from this country but of others. He listed James Hunt, Richard Burton, the Rolling Stones, Humperdinck and Tony Jacklin. He said that they were the seed bed of the entertainment industry. By God! If the argument is reduced to that level, I am not surprised at what the people said they thought of the Shadow Chancellor in a recent poll in The Sunday Times.
Hon. Members will recall that opinion poll in that respectable newspaper The Sunday Times last Sunday. The people were asked about the capability and honesty of the leaders of the parties and whether they were in touch with the people. They were asked whether they were even recognised by the general public. The results were interesting.
For capability, the people put the Prime Minister top of the pops. A total of 76 per cent. thought that he was extremely capable. Only 59 per cent. thought that the Leader of the Opposition was capable. The Chancellor of the Exchequer, trailing a little behind the Prime Minister as one might expect, was thought to be capable by 74 per cent. Where did the


right hon. and learned Member for Surrey, East come? He came bottom of the league with 26 per cent.
Some 65 per cent. of the total thought that the Prime Minister was honest. That is very good for a top politician. The Chancellor of the Exchequer polled 60 per cent. and the Leader of the Opposition less than 50 per cent. A total of 49 per cent. thought that she was honest. That is a disgraceful figure. The Shadow Chancellor polled 22 per cent. My hon. Friend the Member for Penistone (Mr. Mendelson) said earlier that he was a trickster. That is too cruel a word to use. About one in five thought that he was honest. It is not for me to say whether they are right. That is what they think. Sixty-two per cent. thought that the Prime Minister was in touch with ordinary people. Fifty-seven per cent. thought that the Chancellor was in touch with them, less than 50 per cent. thought that the Leader of the Opposition was, and 15 per cent. thought that the Shadow Chancellor was in touch. He is obviously completely out of touch. He might as well go and join Humperdinck. He would never be missed. A total of 86 per cent. recognised the Chancellor and 77 per cent. recognised the Leader of the Opposition.

Mr. Tim Renton: On a point of order, Mr. Murton. I hope that before the hon. Member finishes he will tell us where he came in this list. Is this relevant to the debate? Many hon. Members wish to speak. What have the hon. Member's remarks to do with this debate?

The Chairman: The hon. Member for Fife, Central (Mr. Hamilton) is making comments on the first speech that was made on these amendments. He must be allowed to develop his argument in his own way.

Mr. Hamilton: If you were not retiring at the next General Election, Mr. Murton, I should vote for you again. You are right. I was giving the public estimate of the honesty, capacity, weight and General recognition of the Shadow Chancellor, who is trying to kid people that he would do a better job than the present Chancellor.
I return to the more serious argument about the alleged lack of incentives

engendered by the present tax system. I recall the speech that the Financial Secretary made on 21st February in a debate initiated by the Opposition on the general problem of taxation. The same arguments were being adduced then as we are hearing today. On that occasion my right hon. Friend recounted what happened when the then Chancellor, Mr. Selwyn Lloyd, reduced surtax on earned income by raising the starting point from £2,000 a year for a single person to £5,000. That was an enormous step and was the type of concession that is proposed by the Tories today.
What was the result? Were there tremendous bursts of initiative and enterprise? Was there a flood of Humperdincks and the rest back to this country? I do not know who the equivalent of Humperdinck was at that time, but were such people flooding back as a result? Not a bit. We have had successive crises since then. It made not a ha'p'orth of difference except to those at the top of the salary scales who got the handouts. The exercise was repeated in 1971 by the Tory Government. More cherries were handed out to the wealthy. The top rate for earned income was cut from 88¾ per cent. to 75 per cent. The result of that was a worsening of the economic situation absolutely and relatively compared with our competitors.
The point was further underlined in an article in The Three Banks Review of December 1977 by Sir Henry Phelps Brown, who had been professor of the economics of labour at London University. He said:
In its 'Programme for Action 77', the Confederation of British Industry held that 'lack of incentive has held back productivity in manufacturing industry', and advocated the cutting of taxes, especially income taxes, to restore incentives.
That is the crux of today's argument. The article continued:
Those who see in the incidence of taxation a factor of sufficient strength in itself to account for much of the variations in the pace of the economy, apart from all the other circumstances of the time, should look back to the fifteen years before the First World War. Throughout those years the highest rate of income tax in this country was under 7 per cent. and from 1909 most taxable earned income paid less than 4 per cent. Yet this was not a time of vigorous enterprise responding to incentive, or of high investment in British industry: those fifteen years were a time of stagnation, with no advance in productivity,


no rise in real wages. The reasons for this lay in "other circumstances of the time": the example may serve to indicate how minor a role taxation may play, among other forces, in the shaping of economic performance.
6.30 p.m.
He went on to suggest certain other factors which might explain our unduly poor performance, not only since 1974 but even since before the war. Those explanations involve sociological factors such as the class structure which a lot of people think has disappeared in this country but which is still very much in evidence. One has only to look at the entrants to university to see how little change has taken place there. That fact permeates through to industry, the Civil Service, the political institutions and other places.
The writer of the article referred to what he called "the adversary system"—that is to say, the "we" and "they" syndrome in industrial relations which the Leader of the Opposition seems determined to exacerbate. In every speech she makes, she indicates that she will have a confrontation with the trade union movement. Whatever one might think of organised labour in this country, one must accept that no Government, irrespective of party, can pursue any meaningful policy unless they co-operate with organised labour.
The article goes on to say what we know to be true: that over the years we have had a pathetic output per employee-hour in almost every industry compared with our competitors the United States, Japan, Germany and France. The main constraint here is the massive resistance to change which begins in this place. It is almost impossible to change this place. I have been trying for God knows how many years, but with remarkably little success. The same situation applies in every other institution, whether it is the trade unions, the Civil Service or top management. We have failed all along the line in initiating the changes that are necessary if we are to survive as a competitive industrial nation.
We have simply failed to change our structure to take account of the rapidly changing patterns of international world trade, upon which we so heavily depend. We have failed to change our educational system, the structure of the Civil Service and the political system. Let me use the

expression used by the writer of the article when he referred to the "antique inflexibility" of our trade union institutions and the inefficiency of too much of our industrial management. Hardly a word has been said about that.
Some of the people we have been discussing who earn these massive salaries are being paid far above their worth. There is still a lot of nepotism in top management, and well the Conservatives know it. Some of those concerned are sitting on the Conservative Benches. We see them every day. We can judge them, and it makes me frightened for the future of our industrial economy when I hear top managers uttering such gibberish as we hear from the Conservative Benches day after day.
Let us not pretend that the solution to all these problems lies simply or even mainly in restructuring the fiscal system. Those factors that I have mentioned are of far more fundamental importance than the amendments we are discussing. The Opposition are not concerned much to discuss in any great depth the maladies within our structure. They prefer the superficial vote-catching exercises such as the one in which they are engaged today.
Let me recall what was said by the hon. Member for Horncastle (Mr. Tap-sell) in the debate on taxation on 21st February. He implied—column 1326—that the key to a dynamic economy and to international respect was a system of low rates of direct taxation. So the alleged lack of international respect from which we suffer is, according to the hon. Gentleman, due to our unfair and unjust tax system. He urged that conversely high rates of taxation existed in countries in decline. That is an absurd proposition. He said that the countries with high rates of taxation were in decline, with welfare benefits and living standards that were relatively low. I can refer the hon. Member to Sweden and Norway as good examples of where the reverse is true. They have high taxation rates and very high-quality welfare services—better than in this country.
The latest figures I have show that in 1974 the total tax take in this country was smaller as a proportion of the GNP than in Denmark, Norway, Sweden, Canada and Austria. It is therefore idle to pretend that we are the highest taxed industrial nation.
According to Ecconomic Trends of November 1976, the total raised by national and local taxes, excluding capital taxes, but including social security contributions, because they are severe imposts on lower-paid workers generally, was less as a percentage of GNP at factor cost in the United Kingdom than in Denmark, Norway, Holland, Sweden, France and Canada. Excluding social security contributions, the tax take was higher in Denmark, Norway, Holland and Canada than in the United Kingdom.
There is an undeniable case for having a fundamental and radical look at the total tax structure. That is what the Government are engaged in doing, legitimately. Conservative Members have said that the Chancellor of the Duchy of Lancaster, the Chancellor of the Exchequer, the Prime Minister and others recognise that top management must have a fairer deal than they have had up to now. I recognise that fact. My doubting friends should read the report of the Select Committee on Nationalised Industries a few years ago when it was discussing the top pay of management in nationalised industries. On that Committee were a number of so-called Lefties, and they said that we would not get the best kind of management—presumably we want nationalised industry to have the best kind of management—unless and until we faced the fact that we must pay the rate for the job.
It is idle to pretend that nationalised industries pay salaries that will attract the best kind of management brains. From my experience in my constituency, I have found that the tax system is hitting the lower-paid people far harder than it is hitting those on higher wages. That is not a reason for not dealing with both groups of people. We should not deal with one and exclude the other. In the Budget, concessions have been given to the highly-paid, but the majority of the concessions, quite properly, have been given to the lower-paid people.
There are other serious injustices with the income tax situation. I refer to a glaring injustice which will not meet with the approval of the Opposition. There is a landowner in this country who receives a very large income from his estate. According to the accounts that I have with me, that landowner in 1977

received £290,605 as income from that estate. Conservative Members might say that an enormous part of that sum would be taken in tax. Not a penny of tax was taken from that landowner, because he happens to be the Duke of Cornwall, the Prince of Wales. There is no reason why anybody in this country should be allowed to escape the payment of tax.

Mr. E. Fernyhough: The Leader of the Conservative Party said in a law and order speech last weekend that no exception should be made to any of the laws of this country. That reinforces what my hon. Friend the Member for Fife, Central (Mr. Hamilton) has said. He has the Leader of the Conservative Party on his side.

Mr. Hamilton: I have tried for years to find out why this income is not taxed, not even at the lower rates. I can never get at satisfactory answer. We can find out the taxable income required to give a net income of £200,000-odd a year. As unearned income of more than £20,000 a year, a sum of that nature would be taxed at 98 per cent. To receive £290,000 net, he would need to have a gross income of at least £20 million. How Opposition Members can even pretend that we are moving towards a fair tax system while allowing this kind of scandal. I do not know. I am being listened to almost with incredulity. I do not think that hon. Members opposite believe the facts that I am putting forward. I have seen the accounts of the Duke of Cornwall in the Library, and I invite hon. Members to see them. The accounts show that payments made on account of His Royal Highness were £129,208 in 1976 and £209,605 in 1977. That is an approximate increase over one year of 150 per cent. There is no consideration of norms or phase 1 or phase 2. Nothing of that kind is involved. If the Government took this matter in hand, though the sums are relatively small, the psychological effect would be out of all proportion.
6.45 p.m.
I see that the hon. Member for Halesowen and Stourbridge (Mr. Stokes) is getting restive. I am not doing my job if he is not. The problem to which I have referred applies also to the relatives of the Duke of Cornwall. Unless the


Government tackle the problem, we cannot take them too seriously on other matters.

Mr. Dennis Skinner: There is a strike taking place in one of the Temples near the Law Courts. People are squabbling about the payment of £300 a day. There is a fee of £10,000 involving two gentlemen. One gentleman is a present Tory Member of Parliament, the hon. and learned Member for Thanet, West (Mr. Rees-Davies) and the other is the ex-Tory Member for Ipswich. As a result of all the squabbling over the £300 a day—and they are the people who will benefit from changes in taxation proposed in the amendments—there is a strike in the chambers.

Mr. Hamilton: I hope that the strike continues and that the chambers close. My hon. Friend is underlining what I am saving. These debates are concerned with who gets what out of the tax system. The impression given by the Tory Party—an impression that it intends to create—is that it is looking after the people at the top. We are creating the impression which we intend to create that our job here is to look after the people at the bottom of the income range. All of us, whether the Opposition or the Government, have ultimately to think of the national economy. I hope that my speech has been relatively balanced and moderate.
I recognise the problems in the economy. I do not expect that they can be even largely solved by tinkering with the tax system, which the amendments are essentially doing and treating unfairly the great majority of the people represented by the Labour Party.

Mr. Douglas Crawford: I hope that the Committee will forgive me if I do not take up the latter points made by the hon. Member for Fife, Central (Mr. Hamilton). This is not the place to discuss such matters.
The debate is not just about the widening of the tax bands but is about tax at the higher rates. It is not only about Amendment No. 7 but is about Amendments Nos. 20 and 21. I understand that the cost of Amendment No. 7 in United Kingdom terms would be £150 million a year and the cost of Amendments Nos. 20 and 21 would be £235 million.
In order to put at rest The Times, which, as usual got it wrong this morning, this Bench will be voting for Amendment No. 7 and against Amendments Nos. 20 and 21. We are in favour of raising the threshold of tax for middle management but against dropping the top rate of tax for those who are rather richer. Our decision to support Amendment No. 7 was not particularly easy. It was based not on party political dogma but on pragmatism. Unfortunately, that word has been debased by one right hon. Member.
The Minister of State said that middle managers in Wales were not in the tax bracket which would be affected by raising the threshold from £7,000 to £8,000. I should like to read into the record a letter that I have received from Mr. Michael Moran, the chairman of a company called Microwave & Electronic Systems Limited and a member of the CBI executive committee in Scotland. He said:
As far as MESL is concerned, our continued growth … is, and will continue to be, limited by the national shortage of a pool of talented managers, the engineering disciplines and skilled manpower who are prepared to enter manufacturing industry.
He went on to say:
The multiplier effect, on mopping up semiskilled and unskilled unemployed labour, caused by the existence of such a pool of skilled labour cannot be overstated.
The hon. Member for Cornwall, North (Mr. Pardoe) quoted some figures. Mr. Moran continued:
As an example to demonstrate that current taxation is a disincentive to accepting increased responsibility we can quote the salary band of MESL Divisional Managers in 1973 as £4,000 to £4,300. Today the band is £9,500 to £10,500 which just keeps ahead of the 213 per cent. inflation experienced over the same period i.e. 1973 to 1978. In 1973 the manager did not come near the 40 per cent. taxable income band which started at £5,000 … Today, 1978, the same manager after deducting, say, £2,500 in allowances enters the proposed 40 per cent. tax band which starts at £7,000 … To inflation index the £5,000 tax band in 1973 to 1978 would raise it to £10,550.
That is one of the reasons why my party is supporting Amendment No. 7. If anything, we in Scotland have suffered even more from the emigration of our skilled people than have other parts of the United Kingdom.

Mr. Joseph Dean: The hon. Gentleman quoted from the letter


instances of skilled engineers, but it is difficult to believe that the writer of the letter was being serious when the employers in recent negotiations with the engineering union on behalf of skilled engineers made an original offer of a 2 per cent. wage rise, not the 10 per cent. that other workers received. Why do they not come off it and be genuine?

Mr. Crawford: I was simply quoting from a letter. The point is that in Scotland in particular, if we are to create the sort of industry that we need and to regain our competitive industrial edge and retain and attract skilled managers, we must have a tax system which gives them more incentive.
I am not talking about the land speculators, the multi-millionaires, the tertiary bankers and those who would benefit from Amendments Nos. 20 and 21. I am talking about middle management—the production engineers, the marketing managers, the research managers and all those who can bring back springs of inventiveness to industry in our country. Without these people, industry in Scotland and, no doubt, other parts of the United Kingdom will continue to suffer.
For every skilled job created or retained, several unskilled jobs are provided. Conversely, for every skilled job lost or not created, several unskilled jobs go by the board. The Government have partly recognised this but, in the view of my party, they have not recognised it enough. Hence our support for Amendment No. 7.

Mr. Ron Thomas: The hon. Member has now switched from the example of managers to talk about skilled workers in general. May we be clear? If he is supporting the amendment, he is thinking about people on £10,000-plus a year. According to the latest survey of the Department of Employment, there are no skilled workers to speak of in that bracket. There may be one or two managers. Will the hon. Gentleman make clear that, following the Budget proposals, all he is arguing about is a top band of £1,000 of taxable income that will be taxed at 40 per cent. rather than at 33 per cent. or 34 per cent? He is talking about a quite small sum of money.

Mr. Crawford: I am talking about giving incentives to the people in industry

who will create jobs for unskilled and semi-skilled people. That is where my party stands. If we give incentives to people on £7,000 to £8,000, which is, de facto, £9,000 to £11,000, they will create the jobs that we badly need in Scotland.
I hold no brief for the CBI, but the chairman of the CBI's smaller firms working group in Scotland, Mr. Ron Lander, has said:
I believe that coupled with SNP proposals to reduce the basic rate of income tax by 2p, … a raising of the proposed £7,000 limit to £8,000 … will be … a move in the right direction.
We in Scotland, more than any other part of the United Kingdom, have to rely on inventiveness for the prosperity of our economy. We have to rely on high-value, low-volume products. This means inventiveness. It means the ability to translate invention into commercial reality. It means the ability to translate commercial reality into acceptable products, and it means the ability to sell acceptable products throughout the world.
The raising of the basic tax band from £7,000 to £8,000 means, given the allowances for wives and children, building society mortgages and so on, a de facto widening of the band from about £9,000 to £10,000, but above that level we feel that the imposition of higher rates of tax is not inequitable.
If we are talking about differentials and the need to maintain them, I see nothing to suggest that a man earning, say, £30,000 is three times as good, three times as productive or capable of producing three times as many jobs as a successful middle manager earning £10,000. That is why we shall not be supporting Amendments Nos. 20 and 21.
In all this, the SNP is taking a firmly pragmatic line. Without middle management and people in the earnings bracket of £9,000 to £11,000, industry in Scotland and elsewhere in the United Kingdom will suffer. Obviously the Government have recognised this, but it is essential to maintain the competitive nature of industry and stimulate the springs of industrial inventiveness. We believe that tax incentives for middle management should be enhanced, but there is no way in which we can support a reduction of the tax rates at the top end.

Mr. John Mendelson: My hon. Friend the Member for Bristol, North-West (Mr. Thomas) interrupted the hon. Member for Perth and East Perthshire (Mr. Crawford) to suggest rather politely that he was talking about something with which the amendments do not deal. We did not get a very clear reply to that intervention.
I counsel my hon. Friend not to be surprised that Opposition Members are talking about matters other than the burden of the amendments. With the exception of one Tory landowner who spoke earlier, they are far too ashamed to discuss the amendments. They are making high-toned speeches about wage differentials, about engineers, about skilled craftsmen—about everything but the burden and substance of the amendments and the group of people who will benefit from the vast sums that will be handed out to a tiny section of the population if the amendments are carried. Of course they are talking about other things. It is the normal classical tradition of financial hypocrisy.
I shall not mince my words, because I believe in returning to an earlier tradition of hard hitting talk in Budget debates. That is better than maintaining the artificial high tone that some Opposition Members have introduced to cover their tracks.
7.0 p.m.
What we are discussing today is very much the business of the electorate, and it is something that every right hon. and hon. Member will have to defend. The Minister of State made an outstanding speech in reply to the opening remarks. I say that deliberately against some of the snide attacks that have come from the Conservative Benches, particularly in the immature speech of the hon. Member for Hitchin (Mr. Stewart), who accused my right hon. Friend of having shown prejudice. My right hon. Friend's speech, in defence of the policy that the Government feel is justified, was full of facts and information. That is just what the Opposition do not like, but what they do not like they will have to defend in the country.
It will also have to be defended by the new spokesman on economic policy, the hon. Member for Cornwall, North (Mr. Pardoe), who makes so many high-toned speeches these days. In his speech this

afternoon he introduced the figure of a mythical professor and used him as a prime example to show why the Liberals will support the amendments which among other things will hand out £5,000 to men and women earning £50,000 a year.
We were told, in the excellent speech of the Minister of State that more than 40 per cent. of the money being handed back will concern unearned income and will have nothing to do with earned income.
Returning to the example of the rarefied figure of the professor, the hon. Member for Cornwall, North said that this man would make a basic strategic decision. He gave the impression that he would spend a sleepless night before he decided whether he should give an additional lecture. Heavens above!—no wonder British universities are not making as rapid progress as they should. Membership of the Royal Society is large. In the past 25 years we have had 17 Nobel prizewinners in natural and medical sciences alone in this country. But, of course, we would have had 34 if only the money had been handed back to them in earlier Budgets so that more professors could give more lectures, step up their research, become members of the Royal Society, and win Nobel Prizes for the United Kingdom. That is the picture that the hon. Member painted.
I warn the Financial Secretary—I hope that he will pass this warning on to the Chancellor—that this same hon. Member for Cornwall, North, who has given this childish view, sets himself up as the Government's chief adviser on financial and economic affairs. One cannot pick up a newspaper in Yorkshire, let alone Cornwall, without seeing an announcement that the hon. Member has visited the Chancellor once again behind closed doors.
Once I was not particularly perturbed by these visits. I know that the Chancellor receives many visitors. He has even seen me occasionally, with a deputation of my hon. Friends. I do not think that on those occasions we changed his mind, and therefore I was not particularly worried about the frequent visits of the hon. Member for Cornwall, North. However, when I heard the speech today about a profession of which I know


something, I felt really alarmed. I warn my right hon. Friend to cut down the number of visits made by the hon. Member. Of all the unnecessary and useless activities of recent years, this is the most useless.
The hon. Member for Perth and East Perthshire did not talk about the burden of the amendments, Of course he did not. He was ashamed to do so. He talked about skilled men and engineers. He was pulled up, quite rightly, by my hon. Friend the Member for Leeds, West (Mr. Dean), who has had a lifetime of experience in engineering, unsurpassed by any other hon. Member. The hon. Member for Perth and East Perthshire will have to attend meetings in Perth, not far from the Salutation Hotel, and defend the handing over of £5,000 to financiers and rentiers who are earning £50,000 a year. That is what he will have to defend.

Mr. Joseph Dean: Does my hon. Friend agree that if the hon. Member for Perth and East Perthshire (Mr. Crawford) is sincere, he should have the courage to make such an announcement during the forthcoming by-election campaign in Hamilton?

Mr. Mendelson: Certainly, he will have to address engineers and others in Scotland, because in that country there are many skilled engineers.

Mr. Crawford: I was not talking about people in the £50,000-a-year income bracket. I was talking about people in the £8,000 to £11,000 bracket—the people who are the creators of jobs in this country. That is why I said that we would vote for Amendment No. 7 but against Amendment No. 20.

Mr. Mendelson: The hon. Member has given a much more specific outline in his intervention than he did in his original speech. He talked a lot about skilled engineers. I represent an engineering area. Working engineers earning between £10,000 and £11,000 a year are hard to find in Yorkshire, or anywhere else. I do not believe that the level is much different in Scotland. These are not the people about whom we are talking.
The only Member who approached the problem honestly was the Tory landowner, the hon. Member for Gainsborough (Mr. Kimball), who criticised his

own Front Bench. His main attack was not against the Chancellor; it was against his own Front Bench, because they were not proposing that enough money should be handed out to the richest sections of the population.
What we are seeing tonight must be made clear in the country, and the sooner the better as far as I am concerned. It would be a very good thing if we could start tomorrow afternoon when everything was still fresh in the memory of the electorate. We are discussing the real policy of the Tory Party. This has nothing to do with economic efficiency and strategy. It has nothing to do with the good of the country; it has to do with nothing but giving large sums of public money to those who have too much already. That is traditionally Conservative policy.
Before we get on to the high-toned subjects of economic and financial strategy, we must nail the real attitude of the Tory Opposition. It has nothing whatever to do with any particular economic situation. It does not matter which year it is. These are proposals that the Tories put forward before 1910 and after 1920 by the hard-faced men who had done well out of the war and were always intent on looking after the tiny minority who have too much already.

Mr. Maurice Macmillan: I though that we were debating a reduction in the tax level. The hon. Member refers to "handing out large sums of public money". We are debating the retention of more of the money that people have earned, sometimes overseas.

Mr. Mendelson: I am grateful to the right hon. Gentleman. He could not have given me a better feed. I deliberately used the term "handing out public money" because I was comparing it with the total pool of money raised in taxation. In the mining areas in my constituency are elderly ladies, old-age pensioners, who, if they earn for additional hard work more than a certain limited disregard, immediately pay tax. They will have to make up some of the money handed back to those earning £50,000 a year. If that is not a handout, nothing ever will be.
So, before we get to high-flown subjects like economic strategy, we must


establish what we are really about. There is no relevance to our economic situation in the proposals made in the amendments. The Tories judge that the time is ripe to put them forward with the chance of carrying them so as to reward their political and financial paymasters. They would not have that chance but for the Liberal Party and, in some cases, the smaller parties aiding and abetting them.
The whole political strategy of the Cabinet is coming to grief here. All the concessions that we have been asked to make, all the long hours that we have spent passing legislation to please this group or that, are coming to nothing. When the test comes, they all join the other side. Because of this politcal constellation the Tory Party has judged it right to bring forward these selfish amendments.
There is an argument about economic strategy, however, which can be applied to our tax system. I agree with my hon. Friend the Member for Fife, Central (Mr. Hamilton) that the system needs root-and-branch reform, but this proposal has nothing to do with that. It is intended to hand out money to small sections of the population. Other considerations apply to root-and-branch reform.
We can see the extreme childishness of the hon. Member for Cornwall, North, who poses as economic spokesman for his party. He has argued that these incentives will mean a decisive change in our economic position. What nonsense. Half way through his argument, the hon. Member proved conclusively that he knows nothing about employers and industry. He drew himself up to his full height and said arrogantly—I choose my words carefully—"I am inspired by interest in my job and by job satisfaction." The implication of that statement is that all the employers in my constituency and elsewhere have no interest in their jobs and are inspired by no concern for their industry's prosperity and Britain's future.
The hon. Member, apparently, is the only man who has job satisfaction and works for more than monetary considerations. Everybody in industry is completely below that level. They have to be fed with financial gain if they are to be inspired at all.
What nonsense. I do not claim extensive knowledge of our employers and our

industrial management, though there are hon. Members who do, but even with the limited knowledge that I have acquired in the years during which I have represented an industrial area I know that it is a travesty of the truth to talk in that way about the people who are responsible for running many of our industries.
Those people have their weaknesses, but the majority are at least as concerned with the future, the running of their industries, the technology involved, building up their businesses or—if they belong to a publicly-owned industry—their responsibility to the nation and their industry as they are with their immediate monetary income. To say anything else is complete nonsense. To build a taxation system on such a travesty of the truth is bound to lead to disaster.
7.15 p.m.
But away from all this nonsense—[HON. MEMBERS: "Hear, hear."] Tory Members are right to cheer, because they have been sitting through the same nonsense, for the same year, that I have. Tonight they will benefit from the support of the Liberal Party. They cannot shrug it off.
The arguments of the right hon. and learned Member for Surrey, East (Sir G. Howe) were no better than those of the hon. Member for Cornwall, North. He has put forward the same argument on radio and television; it is a recurrent theme of his. He talked of the decline of Britain's culture as a result of taxation. I thought that we would hear about the decline of the novel. I thought, listening to the right hon. and learned Gentleman, that everyone was leaving Stratford, no new play was opening in London, no poetry was being published. I thought that the ballet had closed down and the opera had come to an end.
Not one of those sections of our cultural life was taken in view by the right hon. and learned Gentleman. He was referring to an entirely different tradition. He was talking about Elton John. He had in mind none of these other flowers of our cultural life. What concerned him was that all the pop stars were leaving the country. Some hon. Members would no doubt wish that that were true, but it is not. However, those are the people that the right hon. and learned Gentleman has in mind.
I am not being unfair to the right hon. and learned Gentleman, because this is not the first time that he has used that argument. One might have thought that his speech today was a natural lapse, but not at all: these are the horizons of the right hon. and learned Gentleman. He regards it as the main indictment of our taxation system that some of these people should announce—as they often arrogantly do—that they have to live in Switzerland or the Canary Islands or somewhere else.
Anyone who wants to build a taxation system on the attitudes of our pop stars is far from giving serious consideration to economic strategy. The kind of contribution that they make to our manufacturing industry is very limited, even as cheer leaders. No serious argument is being proposed today, because the purpose of the amendments is shoddy. One cannot build a serious case on a shoddy foundation.
So the Chancellor has nothing to be afraid of. Perhaps he will ward off the assault and the amendments will be defeated, but I can say honestly, speaking entirely for myself, that although I hope that we shall defeat them—because they are inequitable, unjustified and immoral—if by chance they are carried, I shall not fear going out tomorrow into the highways and byways to tell the people what has been done today. I shall tell them how a small group of financiers and rentiers, people who are already earning too much, will have been benefited by the Tory Opposition and their allies at the expense of the people at large. Let the country judge.

Mr. Tim Renton: The hon. Member for Penistone (Mr. Mendelson) never lets himself down. He drips egalitarian class hatred with all the pleasure and ease with which the rest of us mix milk with our breakfast cereal. He talks of us distributing vast sums to a few extremely selfish people and about how a small group of financiers will benefit tonight. The clichés drip off his tongue. When I listen to him, I realise why Britain is in such a mess, why our industrial production is still lower than it was during the three-day working week and why so many intelligent young men and women are leaving these shores to work elsewhere.
The hon. Member talked of wealthy members of our society as though they

should be ashamed to be wealthy. In his Britain, there should be no Sieffs, no Leverhulmes, no Kleinworts—with all the wealth that those families made certainly, but with all that they then gave to charity and all the employment that they created.
I wish to tell the Committee of a visit I made to a company in Norwich yesterday morning. I am a director of that company. Already the hon. Gentleman can start to be worried about that. I must tell him that I am a non-executive director. That company, which supplies products to the building industry, was started by one man 12 years ago. He started with only 10 employees in a building on Norwich airport, and he paid his rent to the Norwich local authority. He now employs between 700 and 800 people. He is one of the most successful business people in Norwich. He is planning and hoping to build a new factory in Norwich, which is not an area of high employment or an area of industrial growth. With 700 or 800 people directly working for him, I estimate that there are now between 2,500 and 3,000 people, including wives and children, who are directly dependent on that man for jobs and livelihood. It is the imagination and hard work of that man which have created that company. He still owns 75 per cent. of it, and it is his life.
I went round the factory with that gentleman yesterday and he spoke of the new plant he hopes to build. He is, thank goodness, doing extremely well at the moment, but he said to me "What is the point of my going on?" That man earns—let the hon. Member for Penistone note this, because I have no shame in telling him—£30,000 a year before tax. He pays 83 per cent. on a large part of his earned income and 98 per cent. on his savings. Therefore, he has every reason to say to me "What is the point of my going on creating more jobs"—which is what he has done in Norwich—" and helping to build up employment in an area where there is not much employment when that amount of money is being taken from me in tax?"

Mr. Alexander W. Lyon: rose—

Mr. Renton: I am sorry, but I cannot give way to the hon. Gentleman. Many other hon. Members wish to take part in this debate, and I shall not be long.
The last thing that man wants to do is emigrate. His heart is in this country, he loves it and he loves his business.
I was remined, knowing that we were to debate this amendment, of the words of the Chancellor of the Exchequer who not long ago said that small companies were the seed bed for new techniques and new ideas. The hon. Member for Penistone, the hon. Member for Bristol, North-West (Mr. Thomas), the hon. Member for Ormskirk (Mr. Kilroy-Silk) and all the other Left-wing revolutionaries who have spoken this afternoon should remember that in those seed beds somebody has to sow the seed.
Who is it to be? There has to be an entrepreneur to do it. There has to be one man who gives his all in time and effort to get the company going. Those people need motivation. They are not there just for the beer. They are proud of what they are creating, but as part of that pride they need to see that they are getting more earned income than others and that they are building up possessions for themselves, because without that motivation they will not do it. They will not grow and they will not start the new companies.
That is the prospect that lies ahead of the man whose factory I visited yesterday. His view is "What is the purpose of my going on? I might just as well sell up and let a large company take on my business. I shall obtain a good deal of capital, because I have built up the business in the last 12 years, and then I shall go away. I shall emigrate or go to the Channel Islands, where the tax rate is 15 per cent. and where I shall coast along for the remaining 15 years of my life." He does not want to take that step, but why on earth should he not take it when he is taxed at a rate of 83 per cent? That man, who is a job creator, must have his incentive too.
When such people were mentioned this afternoon, Labour Members muttered "Traitor" when there was talk of their emigrating. They are not traitors. They do not have to be sado-masochists and stay here to enjoy paying 83 per cent. in tax to a Labour Chancellor of the Exchequer when they can sell up, live in the Channel Islands and pay tax of only 15 per cent. It is human nature that such people require motivation.

Mr. Powell: What do they do in the Channel Islands?

Mr. Renton: I agree with the right hon. Gentleman. I have been to the Channel Islands once and I regard it as an extremely boring place. Most of the people about whom I am speaking would very much rather stay here, but to stay here they must be given incentive. That is the motive behind our amendment.

Mr. John Mendelson: It makes one cry.

Mr. Renton: It should make the hon. Gentleman cry. He shows a total ignorance of the situation if he does not realise the reasons why so many people are leaving Great Britain.
The hon. Member for Fife, Central (Mr. Hamilton), in a speech that was in part reasonable—a "curate's egg" of a speech—said that income was not the only motivation. Of course the hon. Gentleman is right. But no doubt he will have seen a recent ICI report stating that the productivity of ICI labour in British plants was only half that of ICI labour in its foreign plants. It went on to talk of the demoralisation of its own top management. "Demoralisation" is a strong word but it is a good catch-all phrase. That demoralisation stems from two things. One is the sorrow of top management when they see the militants' love of interrupting production at the smallest excuse. Most top managements want to see their plants working well and output targets being beaten. They are horrified when all their men walk out of the plant, stirred up by militants, for some trivial reason.
The second reason for demoralisation is the very high level of tax on top managements' earned income. If a man is paying tax at 83p or 80p in the £, there comes a moment when a man must say to himself "Why go on, why flog myself to death? Why work on Sundays when I might as well relax, play golf and take life a little bit easier?" Because the necessary incentive is lacking, our industrial production has fallen and the stimulus to get going again does not exist.
The Minister of State, in an appalling speech, sounded like a young Scrooge with a Welsh voice, and it was very unpleasant to hear him. He looked with horror on the fact that our amendments would help those on unearned incomes as well. I


wish to remind him that in Canada, where there is not a Conservative Government but a Liberal Government, if one's sole income is from dividends—unearned income—one can receive $32,000 of dividend income without paying any individual income tax whatever. That is about £17,000 of dividend income which does not attract any individual income tax. The reason is that the authorities in Canada realise the necessity of investing in industry and appreciate that individuals will do that only if they are encouraged to do so by tax relief.
The Minister of State said earlier that only a Tory Party can propose these changes. How right he is. It is for precisely that reason that only the Tories will get small businesses going. Only we will restore incentives to those who, through their ingenuity and hard work, have the capacity to create new employment while creating some wealth for themselves.

7.30 p.m.

Mrs. Audrey Wise: We on the Labour Benches have been told over and over again by Opposition Members that what we are about is the politics of envy and a taxation system based on envy. If we are exchanging this sort of pleasantry, our answer is very simple. What the Opposition are about is the politics of greed.
When the right hon. and learned Member for Surrey, East (Sir G. Howe) talked about wanting to widen the gap between the rich and the poor, I wished that what he said could be put on placards all over the country. I hope that the debate is being broadcast. It would be great if that went out to the country as a message from the Conservative Party: "Widen the gap between the rich and the poor."
We heard nothing about social justice or anything like that. We heard only about sheer greed. "To him who hath shall be given". That is the Tory creed. I suggest all Conservative Members say that over and over again and let the nation hear it. We could not do the job of exposing them half as well.
The Conservatives' priorities were very well illustrated by my right hon. Friend the Minister of State, Treasury, who pointed out that to a married man with

children and an income of £50 a week the Conservatives on Monday, with their great generosity, gave an additional 2p a week.
Where I come from, there is a habit of saying of a woman "She's a good manager." It means that she can make the money go a long way. It is quite a compliment to a working-class woman to be called a good manager. Such women have had lots of practice. That has now become known to the Opposition. They realise that among working-class women there are these paragons who are such good managers that given 2p a week they will make it go a long way.
The hon. Member for Croydon, South (Mr. Clark) showed us the other side of the coin on Monday. He said:
We must remember that it is the £7,000-a-year man or the £8,000-a-year woman who will receive the £50 extra reduction, and they will find it infinitesimal."—[Official Report. 8th May 1978; Vol. 949, c. 863.]
If one has £7,000 or £8,000 taxable income—not even gross income—£50 is infinitesimal, but one must be grateful for 2p a week if all one has is £50 a week. That is the Conservative creed, that is their yardstick, that is the arithmetic that they understand very well. I am very grateful to Opposition Members for spelling it out so clearly so that the population can understand it.
I should have thought that if it was not very important to have £50 extra, the sensible thing to do was to give that extra £50 to those who would notice it, to those who need it. It is astonishing to me that Conservative Members have the brass face to get up in the House of Commons, which has some representatives of the workers, and expose themselves in this way.
The Opposition have an excuse that they put forward. They say that the matter is all about the wealth producers, the people who will not work to the best of their ability unless they are not just given cream and candy but are stuffed with it, as geese are stuffed with food to make pâtéde foie gras. That is what has to happen to such people, using money instead as the only thing that will cause them to give of ther best, never mind the country or their own self-respect. They apparently do not understand arguments such as self-respect and


doing one's best. They simply have to be stuffed with money.
I believe that wealth production is done in a rather different way. The people who are at the heart of the economy in the society that I look at are different people. I believe that it is ordinary workers who produce the country's wealth.
Even if we accepted the Opposition's description of the mainspring of the economy, even if we accepted that after all it is the manager who is the vital person, the Opposition are not basing their claims on facts. I recommend them to study the "New Earnings Survey" 1977, which is a very interesting document. One finds in it such gems as the fact that 86·3 per cent. of managers engaged in general management earned less than £10,000 a year. It is only the people who earn more than £10,000 a year who will benefit from tonight's exercise, so 86·3 per cent. of managers will not benefit from these proposals.
If we look at the category
Managerial excluding general management",
we find that 99 per cent. will not benefit. If we look at those under the heading
Professional and related in science, engineering, technology and similar fields
we find that 98·8 per cent. will not benefit because they earn less than £10,000 a year.
Who will benefit? It will be a very tiny minority. I would fear for the state of this country if I thought that all our fates depended on that tiny minority. But, of course, this is not true. If the hospital porters, the miners or such people stop work, we all know about it straight away. Matters of life and death hang on it. The whole running of the country hangs on it. But I suggest that we do not suffer very much from the loss of the people on the right hon. and learned Gentleman's list.
It is a very tiny minority in Britain as a whole, but I remind the right hon. Member for Down, South (Mr. Powell) that it is an even smaller minority in Northern Ireland. I pointed out on Second Reading, but I hone that I shall be forgiven for mentioning it again because it is a significant fact and not too well known, that in the whole of Northern

Ireland there are only 4,500 incomes—declared incomes, at any rate—of over £10,000 a year. That is even taking husband and wife jointly.
Therefore, I think we can take it pretty well for granted that the right hon. Gentleman will not be supporting these amendments in the Lobby. I think we can take it that he will be endeavouring to do his duty for the majority in Northern Ireland and not that tiny minority. If he and his colleagues choose to go into the Lobby in support of the amendments, I hope that he has some good answers to give to everyone in Northern Ireland who is not among the 4,500. I hope that he will be asked some questions.
This is the most shameful group of amendments from the Opposition that one could possibly imagine. I want to refer briefly to the other side of the picture. The group also contains amendments which go in the opposite direction. The more I have heard from the Opposition, the more I have felt that we were correct to table amendments pointing out that my right hon. Friend the Chancellor of the Exchequer has already been too generous to those in the high brackets.
I believe that it has been a mistake to give way to any degree to the cries from the Opposition for relief for those on enormous incomes. We see what happens. It is a classic case of "Give them an inch and they want a mile." By this we feed their assertions that it is only by tax relief at the top end that there can be any justice—which is the opposite of the truth.
I believe that it is quite wrong to give any tax concessions to those on high incomes without first having achieved a level of public spending which will ensure a decent National Health Service, and without having achieved also a taxation system which means that nobody on levels of income around the supplementary benefit mark will pay tax. As long as we have anybody on such low incomes paying tax, and as long as we have anybody getting money from the State with one hand through family income supplement and handing it back with the other through tax, it is nonsense to make any concession whatever at the top end of the scale.
That is why I shall support my hon. Friend the Member for Bristol, North-West (Mr. Thomas) if he presses his amendment to a Division. That is why I should like the opportunity of pressing my own amendment to a Division, if necessary. My amendment is a good deal more modest and moderate than that of my hon. Friend. He wants to keep things as they are. If that does not succeed, I am even prepared, at a pinch, reluctantly to concede something, but not at levels of income such as £15,000, £20,000 and £23,000. This is quite wrong.
I hope that we shall defeat the attempts of the Opposition tonight. If we do not, I think that they will come to rue their victory, because they will have handed us the very best arguments ever to show them in their true colours.

Mr. Stokes: After four hours of debate I shall not speak at length—unlike some hon. Members this afternoon. I do not know whether I have learnt a great deal from listening to the debate, but I have certainly learnt a lot about the Labour Party and how it still seems to be dominated by the ghost of the class war, which most nations forgot years and years ago.
Members on the Government side seem to have been almost wholly concerned with Socialism and egalitarianism and not with the state of the nation. Anyone would think that we were speaking at a time of great prosperity, when the only problem facing the nation was to hand out the wealth, but, alas, that is not our situation.
Labour Members have ignored our low productivity, which is as low now as in 1974, our low earnings and our falling standard of living. We now have a standard of living that is half that of our old enemy, Germany. I cannot see, therefore, how either the speeches of Labour Members or their amendments to increase taxes can in any way help to restore the economy of this once great nation.
I have not time to comment on all the speeches I have heard, but I will say this to the hon. Member for Fife, Central (Mr. Hamilton). He gave us a list of the popularity stakes, but I noticed that he omitted both His Royal Highness the Prince of Wales and himself. If a comparison were

to be made of the worth to the nation of those two people, I think I know where most of the votes would go. Certainly the Prince gives us value for money and is worth every penny.
For months before the Budget, the Prime Minister, the Chancellor of the Exchequer and other members of the Government were constantly speaking of the need to lessen the tax burden on middle management. The Minister of State—an admirable young man of great gifts whom I personally like—seemed somewhat diffident about industry and who the middle managers were. I hope that when he ceases to be a Minister he will perhaps have time in which to learn much more about industry, which alone creates wealth in this country.

Mr. Rooker: The hon. Gentleman is an expert.

Mr. Stokes: I am not an expert. I have only had 30 years in industry and commerce and in personnel work dealing largely with executives and managerial staff.
7.45 p.m.
The taxable salary band of £7,000 to £8,000, of course, includes thousands of people whom we call middle managers, and in many ways they have suffered more than any other category of person. They do not, on the whole, take very much from the State. Usually they do not live in council houses. They do not draw benefits from the State. They often try to educate their children privately. They certainly amass savings and they are, as we all know, a vital prop in the State.
Incomes policies over recent years have borne down hardly upon those people and held their salaries back. They do not protest—in other countries they would be marching on the streets—yet they have great responsibility. I am thinking particularly of the scores and scores of works and factories in my constituency where so much depends on the works managers and the production managers, who are playing an absolutely vital part in our economy today.

Mr. Rooker: Will the hon. Gentleman give way?

Mr. Stokes: No. The hon. Gentleman's constituency is near to mine and


he knows that I am talking of what really matters.
If production is to be lifted off the ground, where it has lain for four years, those responsible for managing production and handling the work force must have more reward. We have heard today that many are forced to go and work abroad. Many more whom I know personally would like to do so if family and other circumstances permitted. These middle managers are grossly overtaxed and underpaid in comparison with their opposite numbers in Europe.
I say that the Government, in spite of paying lip service to reducing the tax burdens on those in middle management, care nothing for them and know nothing whatever about them or their responsibilities or the important part they play in our vital life. We know why that is. This category of people simply does not have enough votes in the aggregate to appeal to the Government. It is a minority. Somebody said that there may be 850,000 such people. The injustice of their case must be put right, not only for the sake of the people concerned but for the future well-being of the nation.
Including even the war years, I have never known national morale—morale in factories, morale in business and morale everywhere—to be lower than it is today. We have to ask ourselves why our old allies and ex-enemies in Europe have made such a better go of it than we have. I know that the answer is not to be found in fiscal incentives alone. Of course, we need a better lead, more inspiration and greater patriotism, but we must also have more financial incentives if we are to reduce unemployment, which is such a concern of Labour Members, and if once again we are to start to get this country on the way to its former greatness.

Mr. Alexander W. Lyon: With his usual intelligence and insight, the hon. Member for Halesowen and Stourbridge (Mr. Stokes) pointed to the heart of the discussion that we are having today in saying that we are in a situation in which there is very little growth.
If the wealth of the nation were being expanded rapidly and we were talking about the way in which we would share that expanded wealth, I could understand the intensity of the fever that has gene-

rated the call for this kind of amendment. But we are not, The parties that are associated with the proposal to pass these amendments accept that the Government have given away, in £2·5 billion, as much as they could conceivably have done in order to generate new wealth and to stimulate growth. Indeed, the City rather thought that the Government had given away too much, and it was concerned about the increase in the borrowing requirement that might be generated by what had already been done.
The parties that are subscribers to the amendment accept that if we are to give away another £380 million of taxpayers' money it will have to be found somewhere else. It will not come out of new wealth. It will be a redistribution of the tax burden between one taxpayer and another, or it will be a reduction in the standard of services provided by public expenditure.
We on the Labour Benches continually say that the House of Commons—and the Tory Party most of all—really has to learn that the standard of living that many of our people enjoy is heavily dependent on public expenditure. If we cut public expenditure we also cut their standard of living. I say "their", but I really ought to say "our", because there is no one in this country who is not to some extent dependent upon public expenditure.
If, therefore, the Tory Party is suggesting that this £380 million should be paid for by a reduction in public expenditure, it will be at the cost of someone else's standard of living. Because the standard of living is disproportionately dependent upon public expenditure at the lower end of the scale, the likelihood is that this will come from the poorer members of our society. The Liberals say that they will not have that. We have heard the great radical from Cornwall, North (Mr. Pardoe). If the Liberals will not have that, it means placing the burden, through an increase in VAT, on all those who purchase goods on which VAT is charged. That means that the people for whom VAT is a signficant section of their expenditure—again, this is the poorer end of the population—will have to pay more.
The hon. Member for Cornwall, North goes on radio and television protesting that he wants to allow people to choose what they spend and to decide whether they will drink themselves to death or smoke themselves to death. He thinks


that it would be better if they did less. But if they did less they would frustrate the whole object of the hon. Gentleman's tax strategy. What he is saying is that the tax must come from VAT. Therefore, if we reduce consumption of those items on which VAT is charged, we reduce the tax yield. No Chancellor of the Exchequer ever increases VAT or, indeed, specific taxes to a rate at which consumption falls by more than he would gain by an increase in taxation. That is the very essence of Treasury strategy. Therefore, raising VAT or specific taxes will not reduce the price of luxuries. It is precisely because the increase goes on that part of VAT where the items must be bought that we produce a tax yield to pay for the £380 million which in this case will be given to higher income earners.
What we are talking about is not giving something to one section of the population that will not cost anything to any other section of the community. We are only redistributing the burden, having accepted that we have already given away as much as we can this year. That is what the argument is about.
In those circumstances I urge Conservative Members to reconsider their suggestions that we are engaged in class warfare, or that we are generating envy by questioning whether they are making the right judgment tonight. Far from it. It is they who have precipitated this change in priority. In doing so they have shown where their priority lies.
On a number of occasions my hon. Friends have pointed out that this group of amendments will affect 0·8 per cent. of the working population—no more than 200,000. It will cost about £380 million. Therefore, the average for each taxpayer who would benefit from this group of amendments is about £1,500. But the people at the ton end of the scale would get substantially more. By what they did on Monday, the Tories can at least claim that the average worker gets £7·50 a year. One group will get £7·50 a year, yet another will get an average of £1,500.
It does not need any class warrior brought up on Karl Marx to ask in the factory "For whom are these amendments designed?" It does not require us to stir up any degree of class envy. We

need only the average reader of The Sun to be able to understand the difference between £1,500 and £7·50. I can understand that Conservative Members, particularly people like the hon. Member for Halesowen and Stourbridge, might, in a period of expanding wealth, feel that one of the sections of the community that ought to get more of its take-home pay comprises people in the highest level of management. But we are not in that situation; we are in a situation in which we have nothing more to give, but what is being asked is that there should be a redistribution.
In a situation like that it is no wonder that the kind of attitudes generated in the 1930s should be generated again. It is not we who are making the argument; Conservative Members are doing so. What are we talking about? We are talking about taxable income at £7,000 a year, which means gross earnings of at least £10,000 a year. In those terms we are talking about only 0·8 per cent. of the total population. In the non-manual sector we are talking about less than 2 per cent. of the total population. Conservative Members have talked about middle management, but we are not even in the range of middle management, as I understand it. We are not talking about people on less than £10,000 a year—and, by and large, middle management earns less than £10,000 a year. I am told that unless we make this concession we cannot have the kind of incentive that will generate growth, because these people are the risk takers, the men of initiative, and the people who create wealth.
First of all I ask myself whether it is right that most people actually reduce the amount of work that they put into their jobs because they pay a higher rate of tax. The hon. Member for Mid-Sussex (Mr. Renton) gave a heart-rending account of a man who started a business 12 years ago and who was asking only yesterday "How can I go on?" In those 12 years that man has built up the business from nothing and is now getting £30,000 a year. In all those 12 years he has never paid anything less than 75 per cent. at the margin and has never paid much less than 90 per cent. in terms of tax on unearned income. Yet he has gone on building up that firm. He has gone on working the way he has, not because of the rate of money he was


getting out of it but because of the job satisfaction that he was getting out of it. Of course, he grouses about the rate of tax. Of course we hear that constantly, but the fact is that very few people make a decision about the input that they put into the jobs they are doing simply on the basis of tax.
It may be that they do not go for another kind of job. It may be that they do not take on an extra directorship. It may be that they do not take on extra commitments. But that is a quite different matter from saying that they do not put into the job they are doing the kind of incentive and effort that will create new wealth for this country.
The truth is, if we look back over the last 15 years, that when we talk about increasing wealth we are talking about increased investment in industry. Year in year out—no matter what the tax liability, the incentives to investment or the stake given to those who have wealth to put their money into industry—the fact is that investment in industry in Britain has remained at about 4 per cent. or 5 per cent. of GNP. It has been no greater and no less throughout the whole period.
Investment in industry goes up and down with the rates of growth. It is in no way related to levels of taxation or to levels of incentive for investment. Therefore, it is simply untrue to say that unless we give back this kind of money we shall reduce our capacity to grow. We may be losing the odd pop star, but we are not losing the real incentives for work in the areas where it matters.
Even though we need those who have special skills, special ideas and initiative, I question whether the real wealth comes from those qualities alone. For example, it is suggested that British Leyland needs another director, who will be paid a substantial sum to put it on its feet. That suggestion questions the whole basis of a massive organisation of that sort, which depends upon the skill of all its workers.
The truth is that we require initiative from every level of worker. That initiative is called forth not by tax cuts but by a sense of the virtue of working for the sort of society in which we are now living. The tax that we pay and our

gross level of earnings are part of that society. Even more important is our quality of life.
8.0 p.m.
The hon. Member for Mid-Sussex gave the game away when he said that he would not live in Jersey. He would no do so, even though the rates of tax prevailing in Jersey are substantially lower than they are here. Why does he choose not to live in Jersey? It is because the society that he would get in Jersey is not the sort that is attractive to him. If he lived in Jersey, the quality of life would not be the sort that he wants. That is why we live in this society, and part of our society is the public services that we have created by means of the Welfare State since the war.
It may be that in America and some other countries the rates of tax are lower than in Britain, but public services have to be paid for out of taxation. If we want good public services, we want the higher taxation that pays for them. Such services give the quality of life that we should be enjoying, and that should provide an incentive for us to work harder.
If the amendments were tabled at a time when the rate of growth was regularly 3 per cent., 4 per cent. or 5 per cent., it might be appropriate to reconsider the levels of tax at a higher level of earnings. However, to bring the amendments before the Committee now, when we would be taking the money not out of new wealth but from other pockets of those who are poorer than those who would be affected by the amendments,is a disgrace. It is a disgrace that the Opposition parties should be ganging together to obtain concessions for a limited number of their friends.

Mr. Rooker: I intervene only briefly. I apologise to the Committee for being absent for the latter part of the debate. However, I listened to most of the early speeches and to some of the later ones.
This is a black day for the House of Commons. It is a black day for the Liberal Party. It is a black day in the sense that we have spent the whole of the day so far discussing the inadequate returns of those who by common consent are earning in excess of £200 a week. In reality, only those earning in excess of £300 a week will gain anything substantial or meaningful from the amendments, if


they are accepted. That is the part of the working population that we are talking about.
The arguments put forward by the official Opposition are disgraceful. Indeed, the hon. Member for Plymouth, Sutton (Mr. Clark), who had not heard the speech of his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), said that matters had come to a sorry pass when the House of Commons spends a day discussing the financial affairs of the nation and its financial management and we have to start relating those topics to the recording industry and pop stars.
The hon. Gentleman was responding to an intervention made by the Liberal spokesman, the hon. Member for Cornwall, North (Mr. Pardoe). He had not heard the speech made earlier by the right hon. and learned Member for Surrey, East, who devoted a good quarter of an hour of his speech to a eulogy of those non-patriots who have taken off from these shores. There was no mention of those who have stayed here. The right hon. and learned Gentleman had a short list and he could not name one person on it who would come back if the tax rates were reduced. Indeed, he had the good sense to disappear for the latter part of the day.
The debate has shown more than anything else—in this respect I am grateful for it—that the tax system is a social security system for the rich. It is as much a social security system for them, in the sense that it is a handout from the State, as the real social security system is to those who are disadvantaged, such as the deprived, the disabled, the unemployed and the sick. It is as much a benefit to the one section as it is to the other. However, the scale of benefit for the rich is substantially greater. There are fewer at the top end, and the spoils over which we are fighting are for them much greater.
This is the sort of debate to which the broadcasting authorities could have devoted a full period of VHF to enable the public to listen to the speeches. I refer not to the speeches of my hon. Friends and myself but to those of Conservative Members. Not much of an argument need be advanced in opposing

the amendment. The argument has come out of the mouths of the Liberal Party and the Tory Party. I missed the contribution from the Scottish National Party, and we have not yet heard from the Ulster Unionists. The Tories and the Liberals are condemned out of their own mouths.
It has not been explained how the amendments are to be paid for. In the first few minutes of his speech, the right hon. and learned Member for Surrey, East showed that he had his sums wrong. It seems that the Tories had been basing their argument on the answer given on Monday to the hon. Member for Blaby (Mr. Lawson). However, they could not grub up enough specific areas where they could say "The money could be raised in this area." We heard the hoary old arguments about jacking up prices and cutting public expenditure. The threats implicit in cutting public expenditure have been admirably set out by my hon. Friend the Member for York (Mr. Lyon). The examples that we have had have not been specific enough in the sense that the public can take on board the realities. We have heard examples of those on £50,000 a year, which is £1,000 a week. As I have said, it is difficult for my constituents to envisage anybody earning, as opposed to making £1,000 a week. It is beyond their comprehension. As such, arguments about high tax rates do not seem to be meaningful to them.
It has been said that only those earning £10,000 a year will benefit from the Amendments. That is not strictly true. The borderline is about £9,500 a year, or £190 a week. Those with earnings at that level will start to benefit. Their benefit from the amendments would be about £70 a year, which, coupled with the amendment which was passed on Monday, would give them £133 a year. That will be the benefit to the person on £190 a week. Of course, that is chicken-feed to anyone earning that much money. However, we are at only the margin of the effect of the amendments.
It is important to make clear—I am sorry that my right hon. Friends on the Government Front Bench have not aired the point so far—the increase in earnings that would be required to have the same effect as the tax cuts that the amendments propose. The increase equivalent to the tax deductions for the person on £9,500 a year, who will be getting an extra £133


a year in his pocket as a result of tax deductions, would be about £200 to £210 in gross pay. That is the equivalent of a rise of about £4 a week. The person on £190 a week has already had from the Government an extra £186 per year put into his pocket, which is roughly equivalent to a pay rise of about £250 a year, about £5 a week.
If the amendments are carried in their entirety, the person on £9,500 will have had from the Budget or Finance Bill the equivalent of a pay rise of £9 a week. My constituents will consider that to be an enormous increase. In addition, he will receive an increase of 10 per cent. on his salary. Those figures will sound enormous to my constituents, but we are still at only the margins of the amendments. It is necessary to move up the scale to see the real effect of the amendments and the benefit that will be enjoyed by those for whom the Tory Party is speaking.
I do not want to start calling people names. However, I think that my hon. Friend the Member for Penistone (Mr. Mendelson) was correct in his analysis of the motives and the underlying trend of the speech of the right hon. and learned Member for Surrey, East. If there is anything to prove that the Tory Party has been bought by the rich, it is the amendments. Tory Members have not been bought by their constituents. The Tories have said that there are no votes in the amendments; the overwhelming majority of people will not be affected by them. That has been agreed by those on both sides of the Chamber. However, it is clear that there are those on the Opposition Benches who have been bought. I say that in its widest sense. I make no accusations about the CBI offering things and others saying that there are a few parliamentary agencies or directorships spare and that if they got together they could screw the Government and get some benefits. The benefits will go to a select bunch of people.
I take one example. I do not take the example of the man on £50,000 a year. There are very few people on £50,000 a year. Nevertheless, an increase in take-home pay of £100 a week is a fair example for my right hon. Friend to take. I take the man on the higher rate band—the man on £23,000 a year, on which he starts to pay 83 per cent. That does not

take account of his personal allowance of £1,300 or his mortgage or insurance relief. His actual earnings could be £30,000, to give him £23,000 of taxable income. Those in that position know that that is conceivable.
The Finance Bill, which I support, goes some way to give tax relief to such an individual. The person on £23,000 will pay income tax of £12,730. That is my calculation. I may be a bit out, but, give or take £100 here or there, it will not make much difference to that kind of person.
At the end of the day, if the amendments are passed, that individual, according to my calculation, will pay only £11,040. His increase is rather more than was suggested by my hon. Friend the Member for Bristol, North-West (Mr. Thomas). His increase will be £1,690. That is approximately £1,700 a year or £34 a week extra in his pocket.
What kind of salary increase would a person earning that level of money and getting this massive tax handout from the Tories have to obtain to receive the same net increase in take-home pay? It is quite simple. He will get £1,700 if he is at the margin paying 83 per cent. at the top rate. Clearly, the £1,700 is the residual 17 per cent. Therefore, the 83 per cent. which has gone in tax is £8,300. In other words, he needs an increase of £10,000 a year and his taxable income is only £23,000. At the outside, his gross salary would be £30,000, given all the other tax reliefs and handouts at that end of the social security system. On £30,000 a year he is getting the equivalent of a salary increase of £10,000–33 per cent. That is somewhat more than the 10 per cent. Government guideline. What is more, it is inconceivable to explain it to my contituents.
I wanted to intervene in the speech by the hon. Member for Cornwall, North but he would not let me do so. I wanted to ask a question when he referred to the public opinion survey. When people answer the question by saying "Yes, the better-paid pay too much tax", they are not talking about people earning £30,000 or £50,000 a year. They find it difficult to understand that someone can, do a job that is so important that he should get that amount in the first place.


This is quite genuine. I have tried to explain the situation to constituents when they have come to me with their problems. Widows often find that they are heavily taxed on their earnings. I have to explain that widows' pensions are added to earnings and that that is why they seem to be paying a lot of tax.
I have tried putting the other side of the coin. I have pointed out that some people get a lot more money and still pay only the same percentage on their earnings—perhaps 80 per cent.—but that it is done in a slightly different way. In other words, those at the lower end can pay as a percentage more than those at the top.
People caught in the poverty trap, as the Meade Report explains, could pay 106 per cent. For every £1 increase in salary, they are 6p a week worse off in their net income. We never hear that from the Opposition. They belly-ache day in, day out in this Chamber, on radio and television about the man who is paying 83 per cent. or, when they want to use the extreme, 98 per cent. They never say—and the interviewers, including Jimmy Young, never ask them—what a person has to earn to pay that amount of tax. They never offer the fact that he has to earn nearly £500 a week before he pays 83 per cent. in the pound. The Opposition never put that point across to the public. What is more, neither do my right hon. and hon. Friends on the Treasury Bench. It always has to come from Labour Back Benchers. It is important that it comes often and that, when it comes, it comes at length.
8.15 p.m.
All those dinner-jacketed twits presently walking about this place who want an early Division will have to wait, because more hon. Members want to make speeches. I am glad that the hon. Member for Sutton has returned. I referred to him earlier in nice, not disparaging terms. I hope that he will make a speech before the debate is concluded, because he made some important points in his intervention following the speech by the spokesman for the Liberal Party. I thought that they were important and courageous points for a Tory Member to make.
We have heard from the Tories today that we have to get the higher rate tax

bands moved in line with inflation to keep things where they are. In the 1977 Budget, which did not meet with the wholesale approval of Labour Members, the percentage change in the threshold at the higher-rate bands was somewhat greater than at the lower-rate bands. My right hon. Friend has changed that situation this year. I again put on record the fact that my right hon. and hon. Friends have listened to the Labour movement and to Labour Members of Parliament.
It is worth putting on record that last year, for those with a taxable income of, say, £10,000 and paying 60 per cent. tax, the threshold was raised by 18 per cent. For those in the next band—£10,000 to £12,000 taxable income, paying 65 per cent.—the threshold was raised by 20 per cent. At the margin, £6,500 to £7,500 the threshold was raised 23 per cent. That was more than the inflation level of 1977 and more in percentage terms than the increase in personal allowances for the lower-paid. We have that again this year, although not to the same extent. But still the Tories belly-ache about it.
I sought to intervene in the speech by the hon. Member for Halesowen and Stourbridge (Mr. Stokes), who has left the Chamber, but he politely refused to give way. I wanted to ask him how many production and works managers in the West Midlands—the two examples that he gave—are earning more than £10,000. It is accepted that that is the minimum from which we start. At that level it is chicken-feed. It will not make an iota of difference, because they do not get paid overtime, whether they put in more or less effort. I asked how many. There are not many.
One of the problems in manufacturing industry is that those at the sharp end of management, those running factories, working and creating wealth, are more lowly paid than the salesmen, the accountants, the lawyers and so on. I admit an interest as a former production engineer and, indeed, a former production manager. When moving, creating or setting up new factories, it never crossed my mind that I was being screwed. I thought that I was making a social contribution through income tax to the social wage of the disadvantaged. I deeply resent that the Tories, aided by the Liberals and others, wish to ensure that the social wage for the disadvantaged is actually


paid by the disadvantaged. That is the effect of the amendments.
The money has to come from somewhere. We cannot afford £300 million one day and £300 million the next over and above the Chancellor's figures. I make that point again because it needs to be put on record. Last year the change was within what the Chancellor said he had available. My hon. Friends and I were not seeking to increase the total amount given away in tax reliefs. But these amendments—both Monday's and today's—are to increase those amounts. There is £750 million involved.
The average general hospital costs, I think, about £40 million. We could have quite a large hospital for £40 million. It is easy to see how many hospitals we could get for nearly £800 million. We need more public expenditure. At Social Services Question Time, my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) was arguing for more public expenditure on behalf of his constituents, and other hon. Members do the same. I understand that the same case was made to Ministers at the Department of the Environment today.
I think that this is a black day, and I am sorry that the House of Commons has spent so long on these amendments. But our debate will give my hon. Friends and myself some very useful and effective propaganda when the next General Election comes—when the call comes, as the Prime Minister put it yesterday. It will be wonderful propaganda. The Opposition have condemned themselves out of their own mouths. They have condemned themselves as being opposed to the vast majority of working people in this country.
The Opposition make their specious claim to be in favour of skilled craftsmen, but skilled craftsmen will not benefit one iota from their amendments today, just they will not benefit one iota from Monday's changes, as I pointed out then. Monday's changes give maximum benefit at £170 a week and there are not many skilled craftsmen on £170 a week, even with overtime. Today's changes start at about £190, but they begin to be really effective at about £300 a week.
Thus, we can see the sort of people who will benefit. They must have very large pockets, because they have the

whole of the Tory Party in their pockets. They must have purchased every man-jack of the Tory Party, lock stock and barrel, so that the Opposition would have the effrontery and nerve to put forward these amendments, knowing full well that, with the Liberals, they might be carried.
This is financial irresponsibility of the most stupid kind that we have seen in the past four years, or, rather, in the past six years, in fact, as the Chancellor said yesterday, since probably nothing can surpass the financial irresponsibility of the Tory Party in the years 1972–74. But they are coming very close to that tonight, and it is up to all hon. Members who wish to show themselves as honourable Members to vote against these amendments. There will be no honourable Members in the Aye Lobby tonight. It is up to those who wish to retain that title to ensure that the amendments are defeated.

Mr. Fernyhough: With 99·9 per cent. of what my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) had to say I entirely agree. It was very much in keeping with what I said over 30 years ago in my non-controversial maiden speech.
We on the Government side have been accused of being nothing but rabid Socialists. We are called egalitarians, and all sorts of other descriptions have been applied to us. What did I come here for? On what basis have I constantly appealed to the people who sent me here, except on the basis of Socialism, of more egalitarianism? I spell it out to the Opposition.
I have repeatedly tried to explain to people that the conflict in any democratic society is the eternal conflict between the ever-increasing demand for personal consumption and the ever-increasing demand for collective consumption. There is this dichotomy. People want more in their pockets, but at the same time, as is demonstrated at Question Time after Question Time when hon. Members raise matters on behalf of their constituents, they want more public expenditure as well.
It is necessary, therefore, that those of us who believe in a high rate of public expenditure should point out that the collective demands which our people make


can be met only by sacrifices in personal appetites.
I ask hon. Members to imagine what would happen if there were a referendum tonight on the question whether the Committee should pass these amendments or should vote for spending the money on reducing the 600,000-long waiting list for hospital beds about which, a fortnight ago last Monday, right hon. Members on the Opposition Front Bench were shedding crocodile tears. I have no doubt what the answer of the British people would be, for they are a fair-minded and compassionate people. At bottom, they hate greed and selfishness.
What has been put to us this evening, on the other hand, is an appeal to greed and selfishness. The people who would benefit from these amendments are not people on the breadline. They are not the homeless. They are not people who are going without anything that really matters. They have already got plenty. They are not waiting for hospital beds. They are not waiting for council houses.
I do not envy such people. I was brought up to believe that if one's wants in life are small one is a rich man, and I have been a rich man all my life because of that. Anyone can see my income tax figures. I have them here. I always carry them. I take them out in the pubs and say "Here are my figures. Let me see yours." That is the best argument.
I am not, therefore, envious of those people, but I am angry with them, or, rather, angry with those who support them. At Question Time or on Supply Days the Government are attacked for not doing enough in this direction or that, and in every case such demands would require more public expenditure. Those who make those attacks, however, then come to this Committee and table amendments that would deny the Chancellor £380 million. I know how right hon. and hon. Members on the Opposition Benches feel. I feel deeply about schools, about homes, and about hospitals, so I do not want the Chancellor to be denied this revenue, since I want more spending in those directions.
I wonder what the Tory reaction would be if the Chancellor said "All right—I shall make this concession, but I shall take it off the defence budget." He must

either reduce his public expenditure or increase his public borrowing. I hope, therefore, that if he has to decrease public expenditure by £380 million, whoever is to wind up for the Opposition will make clear where the saving of £380 million is to come from—unless, of course, the argument is that the Chancellor should again exceed his borrowing limit and go more into debt.
We are living in what I would call a convulsive time throughout Europe. I believe that we are the most peaceable nation in the whole of Europe. I am one of those who preach day in and day out, to the lads who think that there is some swift way of changing our society, that over the years, because of our national temperament and regard for debate, we have fashioned an instrument by which we can change our society through the ballot box rather than on the barricades, by counting heads rather than by breaking them.
8.30 p.m.
It is important that men such as I are listened to by other elements in the country. I tell right hon. and hon. Members on the Opposition Benches that those who want to change our society can do it only by counting heads, not by breaking heads. They can do it only through the ballot box, not through the barricades. If they lose faith in fellows such as I, if they no longer listen to our message, then, however unfair they think this Budget is, Heaven help them if those who are likely to succeed me take over.
Even at this last minute I ask those who are responsible for the amendments to reconsider their position. They should realise that when we have to explain to the men in the fields, factories and mines that we want them to be responsible and to understand something of the difficulties that the Government face, they will say "Did the Tory Party do that when they were seeking £380 million for those who are already well off?" Unless they can give an answer to that they are unworthy of being Members of the House of Commons.

Mr. Stanley Newens: I did not intend to intervene in the debate, but I have been sitting here for a considerable time. I listened carefully and I felt that having waited for the vote I could not allow the opportunity to speak to pass by.
This afternoon I attended a lobby of a number of industrial civil servants in the House of Commons. They came here to present their case to hon. Members. I regret that no Opposition Members were present. If I am doing anybody an injustice I hasten to withdraw, but when I went to the lobby all the hon. Members present were from this side of the Committee.

Mr. Peter Rees: For the record, I at least went to see a delegation from my constituency. I am sure that many of my hon. Friends did the same.

Mr. Newens: I am prepared to accept that many Opposition Members received representations. Some of them may have met deputations from the industrial civil servants. What I say is a fact. When I was there a considerable number of my hon. Friends were present but not one Opposition Member was there. I do not wish to cast aspersions on any hon. Member who may have received a deputation earlier.
My point is that those who lobbied us today sometimes take home as little as £32 a week. In those circumstances I feel deeply ashamed that we should have spent most of the day discussing how we can redistribute money to the tiniest and most affluent minority in the nation.
Make no mistake, the object of the Opposition is to transfer wealth from the type of people who came to the House of Commons today to lobby us, and many others in similar circumstances, to those who are earning more than £200 or £300 a week.
Not only Conservative Members have taken this stand. Members of the Liberal Party are also involved, although they claim to speak for more egalitarianism in our society. If the moneys that will be deducted from the revenue by this amendment had to be raised from other sources, they could be raised only from those whom the Liberal Party says it wishes to help. If the money had to be raised through VAT or the other direct tax bands it would be paid predominantly by those on the lower levels of income.
The proposal might have some merit if those who support it could argue that it was justified because it would induce people to work harder. The Opposition have referred to business men who, they

say, feel that there is no point in going on because of the level of tax. Those business men will certainly not work any harder if the amendment is made tonight. If they worked harder it would be a condemnation of the whole basis of their motivation.
I have sufficient faith in human beings to believe that they are not solely motivated by greed and the hope of gain. I believe that many of them are motivated by other objectives. I am surprised that the Liberal Party seems to believe that the only possible incentive is hope of gain, which means greed. I can see the hon. Member for Rochdale (Mr. Smith) nodding his head in agreement with that statement. I disagree with him profoundly on this. As my hon. Friend the Member for Fife, Central (Mr. Hamilton) said earlier, we come to work in this place not because we are motivated solely by the desire to gain but because we get job satisfaction.
I believe that for the most part, our people, including many of the business men cited by the Opposition as examples to support their case, are motivated by job satisfaction and by the desire to do a good job and to do something for their country, as well as hoping to gain.
In those circumstances the amendment is a disgrace. We should be spending our time considering how we can redistribute income to help people such as the industrial civil servants and those who are disabled and unable to work and enjoy a better standard of living. Like many of my hon. Friends, I hope that the electorate will see the report of this debate and realise where the clear division runs in this House between thoses of us who are Socialists and proud of it and those who support a different system, including the Liberals. I believe that it will be clear that the Opposition side stands for greed and for rewarding those who have the most. I believe that most of the people in this country, if the issue is put clearly to them, will see that the Labour Party stands far more for their interests than the Opposition could ever hope to do.

Mr. Peter Tapsell: Although it was not obvious from most of the speeches that we have heard from the Government Benches today, there is now a wide understanding in this country


that we are burdened with the heaviest weight of direct taxation in the civilised world and that this has been a significant factor in our lamentable economic performance in recent years, our very high level of unemployment, and our poor social services, by comparison with those in most of the other countries in Western Europe.
The powerful national recognition of these facts was significantly expressed on Monday evening when the Committee, by a decision unprecedented in our fiscal and parliamentary history, voted to reduce the basic rate of income tax. By so doing and by long-established parliamentary convention, it unmistakably declared its lack of confidence in the Chancellor's Budget judgment and in the Government's whole fiscal policy of excessively high direct taxation.
Most people outside the House appreciate that our income tax structure, bad at every level, is, as the hon. Member for Fife, Central (Mr. Hamilton) said, at its very worst at the bottom and at the top. Many of us in past debates have drawn attention to the poverty trap and the harsh tax treatment of the lower paid. Tonight, in speaking to these amendments, we are concentrating attention on the more highly paid. Labour Members who would have us believe that there is no broad-based national understanding of the significance of the problem of the over-taxed highly paid are wrong. The British people have a far greater political wisdom and economic good sense than some Labour right hon. and hon. Members seem to comprehend.
This was confirmed again recently by the public opinion poll on taxation quoted by the hon. Member for Cornwall, North (Mr. Pardoe). That was a public opinion poll conducted by MORI, published in the Business News section of The Sunday Times on 16th April. A total of 73 per cent. of those polled—an exceptionally high figure to hold a definite opinion on any subject—agreed with the statement:
Higher paid people pay so much income tax that there is no incentive for them to work harder.
Only 23 per cent. positively disagreed with that proposition.
Since, by definition, only a minority of people are among the higher paid, the

damaging effect on national prosperity of excessive tax disincentives at the top is clearly understood by the great majority of people in this country. This is also a view held privately by many Government Members and publicly expressed recently before a mass audience on the "Weekend World" television programme on 23rd April by a senior member of the Cabinet, the Chancellor of the Duchy of Lancaster, who is, after all, the special economic and financial adviser to the Prime Minister and therefore speaks on all these matters with special authority. The Chancellor of the Duchy said:
The 83 per cent. … rate is too high and has to come down as soon as we can possibly bring it down.
The right hon. Gentleman is absolutely right. He went on, wisely, to place the matter in its international context. Despite this Chancellor of the Exchequer, we are still a great trading nation. The standard of living of all the people in the country depends to a great extent on our international competitiveness. On this television programme, watched by millions the other day, the Chancellor of the Duchy said:
I don't deny that there has to be a move to make our tax rates, especially on earnings, comparable with what our rivals, or our friendly partners, on the Continent have in the way of tax rates. Of course, this has to be done. Otherwise, as I said candidly, the consequences will be damaging to our economy.
Listening to almost all the speeches from the Government side today, it is extraordinary that that statement should have been made by a member of the Cabinet who has not been repudiated by the Prime Minister or his party. It suggests that members of the Labour Party talk with very different voices.
8.45 p.m.
The amendments are entirely in keeping with the sensible views expressed by the Chancellor of the Duchy of Lancaster. He rightly drew the nation's attention to the fact that our top rate of direct taxation on earned income, at 83 per cent., is far higher than that of our friendly rivals on the Continent. In France, the top rate is 54 per cent. In Germany it is 56 per cent. If we stay within the OECD group of countries, but move further afield, we find that the top rate in the United States is 55 per cent. and that while the top rate in Japan is 67 per cent., that rate applies only to incomes over the


equivalent of £200,000 a year. Here, our top rate of 83 per cent. starts at £23,000 a year.
If our amendment to reduce the top rate of tax on earned income in this country from 83 per cent. to 70 per cent., is carried tonight, as I hope it will be, Britain will still have a top tax rate which is significantly higher than that of Germany, France, the United States, or Japan. What is true of the top rates of tax in each of those countries—our direct industrial competitors in the markets of the world—is also true of their intermediate higher rate bands.
Our tax bands start at lower levels and rise more rapidly and more steeply to greater heights than those anywhere else in the civilised world. That may sound like a mediaeval curse, but it is a plain statement of Socialist fact.
Not surprisingly, our 83 per cent. rate has commanded the most international attention because of its obviously sensational economic stupidity, but the greatest damage to our economy is done by the middle ranges of the higher tax bands. Our amendments on the threshold, rates and bands, taken together, would cost £190 million this year—just one-twentieth of the increased rate of public expenditure upon which the Government are embarked this year and against which we voted in the debate on the public expenditure White Paper.
The situation is a great deal worse than is revealed simply by international comparisons confined to top tax rates, because all our higher rate bands come into effect at so much lower levels than those in competitor countries. Even after the modest improvements proposed in the Budget, the 83 per cent. top rate of tax will become payable after the first £23,000 of taxable income which, in practice, probably often means a gross income of about £25,000.
In France, the very much lower top rate of 54 per cent. does not become payable until a gross income of £53,000 a year is reached. In Germany, top rates are reached only on incomes over £65,000 a year. In Belgium, the figure is £66,000 a year, and in Italy £374,000 a year. In each case, those top rates are also much lower than ours.
When we consider that our competitor countries have lower rates of direct tax

at every level of income and higher starting levels at every stage and higher overall salary scales, the daunting extent of the handicap under which success labours in Britain stands fully revealed.
There is a further consideration: not the X factor associated with Service pay, but what might be called the D factor—D for disincentive, or even despair. The disincentive effect of taxation lies far more in high marginal rates of taxation—the proportion lost of the next additional pound one earns—than in the actual amount of tax levied overall.
That is my answer to the interesting points made by the hon. Member for Fife, Central. That is why the disincentive effect of high taxation in the United Kingdom is greater than in the other countries that the hon. Member mentioned. To be fair, there are some countries where the overall burden of tax is not significantly different from ours, if one includes employers' social security contributions in the figures and expresses the result as a proportion of gross domestic product. That is a fair point, but it is the psychology of taxation which deserves greater attention than it has received tonight.
A comparison of the British and German tax structures is very interesting in this context. Whereas the overall burden of taxation—if one includes employers' social security contributions—is not dissimilar, as a percentage of GDP, the Germans' marginal rates of direct taxation are very much lower.
A married couple on £25,000 a year of earned income pay a marginal income tax rate of 70 per cent. in Britain, while in Germany they pay only 47½ per cent. In France, the marginal rate is only 36 per cent.—almost exactly half the British marginal rate. That is the direction in which we should be steering our tax system, and we should start doing so tonight.
Recently I was talking to the chairman of a successful group of companies. He has built up these companies himself and they now provide employment for 6,250 people in this country. The group has an exceptionally fine export record and has established seven subsidiary companies abroad, not exporting jobs but helping to secure and expand those in the United Kingdom.
The chairman told me that the young Englishman who manages his subsidiary company in France, employing only 100 people, receives a gross salary which is two-thirds of that received by him as group chairman. After paying tax that young Englishman receives 50 per cent. more net pay than does his chairman in Britain. That means that the chairman is working for his family for four months of the year and for the Inland Revenue for the other eight months.
By contrast, the young Englishman working in France works for the French Inland Revenue for two and a half months and for himself and his family for nine and a half months. It is not surprising that that young man recently refused a post of higher responsibility which would have required him to return to Britain.
That sort of situation is familiar to any fairly successful business man in this country. It is a cautionary tale for the ruination of Britain, and our amendments would help to make this a little less prevalent.
Consider next the comparative positions of two senior airline captains—one with British Airways and one with Air France. Both are flying Boeing 747s—the jumbo jets—which are the bread and butter aircraft of the two national airlines. These are not the kind of people who have ben described by hon. Members on the Government Benches below the Gangway. They are chosen on merit and experience, and no one would suggest that inherited wealth or family connections have anything to do with their appointments. International competition with one another is great, as is their responsibility. In fact they have, on occasions, even had responsibility for the lives of hon. Members below the Gangway. They fly the same aircraft over similar routes for about the same number of hours.
What is their respective treatment by their two countries, by which we can measure that international comparability of tax treatment towards which the Chancellor of the Duchy of Lancaster tells us we must aim? The French pilot gets £45,000 a year, of which 17 per cent. is taken in tax. The British pilot gets £17,500, of which 31 per cent. is taken in tax. In most other occupations,

the rate of tax would be higher, but he has certain tax-free overseas allowances. If the British pilot were paid as much as the French pilot, his marginal rate of tax would be 70 per cent., and 60 per cent. of his earnings would be taken from him.
When that personal situation is projected—as it has to be because it exists—over every aspect of competitive international activity, it is astonishing that our share of world trade has not fallen even further and faster than it has. Little wonder that the Cambridge Group of economists is predicting 5 million unemployed for this country if present policies are not changed, or that 73 per cent. of the electorate readily agree that higher-paid people pay too much income tax.
The Chancellor of the Duchy also said that the deforming of the tax structure by inflation was something to which the Government had been far too slow to respond and that the Labour Party was open to critcism on those grounds. That is undoubtedly true. Our amendments would by no means make good the ravages of inflation over the past five years, but they are a start.
The starting point for the higher rates in 1973–74 was £5,000. If that was appropriate then, the starting rate for the first higher rate band now should be more than £10,000. But our amendment suggests only £8,000, so we are a long way from getting back to the level of Conservative tax rates.
Even if Labour Members want nothing to do with Tory tax rates and accept that they can never hope to get back to Tory tax levels, even if we take the first Budget of this Chancellor, when he was still in his "howls of anguish" policy mood, in the March 1974 Budget when he reduced the starting rate of the first higher band to £4,500, today's equivalent, after a rise in the RPI of 87 per cent., would be £8,400. Again, we suggest only £8,000.
It is difficult to understand the stream of speeches for hour after hour by Labour Members saying that our amendments are absolutely intolerable when they are not even as generous as the proposals introduced by their own party when they came to power in 1974 and lowered the tax bands.
In a letter dated 3rd May, the British Institute of Management said that the real value of the earnings of senior


executives on £15,000 a year had fallen since 1973 by 33 per cent. This amendment will be only a modest start towards recovering some of that lost ground.
In every case, it is clear that our present tax system is impoverishing not just the individuals in the higher salary brackets but the whole community, which could and would benefit from their wealth-creating activities if only they could be unshackled.
My right hon and learned Friend the Member for Surrey, East (Sir G. Howe) made plain our position on the public sector borrowing requirement, and I shall not at this hour repeat what he said. If our amendment is carried, we shall look to the Government to make compensatory reductions in their own overblown proposed public expenditure of £67,000 million this year, by comparison with the cost of £190 million of our amendments.
There could be no better value for money in bringing back prosperity to the British people than a shift of priorities away from bureaucrats in favour of business men. I urge my right hon. and hon. Friends to vote for the amendments.

9.0 p.m.

Mr. Denzil Davies: I have already had one opportunity to address the Committee, and because I feel that most hon. Members wish to see this matter decided rapidly one way or the other, I shall be brief.
I wish to deal with one or two points raised in this excellent debate. I do not think that my remarks will reconcile the conflicting arguments. I wish to refer to what was said by the hon. Member for Halesowen and Stourbridge (Mr. Stokes). He chastised me for not knowing what a middle manager was. I think I can be excused for not knowing, because it is not a precise term. The hon. Gentleman, with his great experience of these matters, said that a middle manager usually earns between £7,000 and £8,000 taxable income. If we take into account allowances, that puts the middle manager up to a figure of between £9,500 and £10,000 a year. The point that I was trying to make was that Amendments Nos. 7 and 20 do very little for the middle manager, even within the definition laid down by the hon. Gentleman, who understands these things.
The Committee should be clear that we are not voting tonight to benefit the middle manager, who is a person with great responsibility, who has to run a factory, and who may well feel that in the last few years he has been hard pressed on income. I emphasise that these amendments do little or nothing for the middle manager. Opposition Members appear to disagree, but a man with gross earnings of £10,000 will receive little or no benefit from these proposals. That will happen because of the allowances in question, quite apart from mortgage interest. That is an incontrovertible fact.
These amendments will start to benefit people earning salaries of £15,000 upwards. The total cost of the amendments in a full year will be £385 million. The question we must decide is how that figure of £385 million is to be found. I do not know where it is to be found. The Tory Party wants to cut public expenditure, but will not tell us where.

Mr. John Moore: Earlier in the debate my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) emphasised a specific point in regard to members of the Inland Revenue. We have now had a debate lasting five hours and two minutes. Has the Minister of State been given the information that will allow him to apologise on behalf of his right hon. Friend the Chief Secretary for the mistake that he made on Monday night?

Mr. Davies: My right hon. Friend will deal with these figures next Tuesday in Committee. [HON. MEMBERS: "Oh."] If my right hon. Friend was wrong he will no doubt, with his customary graciousness, apologise to the Committee. On the other hand, if the right hon. and learned Gentleman was wrong, he also, with his customary graciousness, will apologise.
I repeat that the two amendments will cost £385 million in a full year. The Tory Opposition want to cut public expenditure but do not know where to cut it, except by sacking 20,000 Inland Revenue staff. That was the only suggestion they could make. There was very little concern about the public sector borrowing requirement, financial rectitude, M3, or any of the other matters on which they have preached to us from time to time.
The Liberal Party wants to find the money by increasing VAT. In other words, the majority of the population will have to pay more in price increases to provide £385 million to those earning £15,000 a year and more. I regard that as unfair and unjust. I am surprised that a party such as the Liberal Party should seek to ally itself with the Tories on such a proposition.
If a sum of £385 million were available, it would be our desire to use that money to benefit those in the tax system who suffer most. I suggest that there are some people who suffer more from the

tax system than those who earn £15,000 or £25,000 a year.

If this extra money were available, it should go to those in the poverty trap, those on low pay, those who have suffered most as a result of inflation over the past few years. That is the choice of priorities that we make. The Tory Opposition clearly prefer to help their rich friends, and will try to do so with the amendment. I ask the Committee to reject it.

Question put, That the amendment be made:—

The Committee divided: Ayes 288, Noes 286.

Division No. 202]
AYES
[9.5 p.m.


Adley Robert
Drayson, Burnaby
Howe, Rt Hon Sir Geoffrey


Aitken, Jonathan
du Cann, Rt Hon Edward
Howell, David (Guildford)


Alison, Michael
Dunlop, John
Howells, Geraint (Cardigan)


Amery, Rt Hon Julian
Durant, Tony
Hunt, David (Wirral)


Arnold, Tom
Dykes, Hugh
Hunt, John (Ravensbourne)


Atkins, Rt Hon H. (Spelthorne)
Eden, Rt Hon Sir John
Hurd, Douglas


Awdry, Daniel
Edwards, Nicholas (Pembroke)
Hutchison, Michael Clark


Bain, Mrs Margaret
Elliott, Sir William
Irving, Charles (Cheltenham)


Baker, Kenneth
Emery, Peter
James, David


Banks, Robert
Eyre, Reginald
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Beith, A. J.
Fairbairn, Nicholas
Jessel, Toby


Bendall, Vivian (Ilford North)
Farr, John
Johnson Smith, G. (E Grinstead)


Bennett, Sir Frederic (Torbay)
Fell, Anthony
Johnston, Russell (Inverness)


Bennett, Dr Reginald (Fareham)
Finsberg, Geoffrey
Jones, Arthur (Daventry)


Benyon, W.
Fisher, Sir Nigel
Jopling, Michael


Berry, Hon Anthony
Fookes, Miss Janet
Joseph, Rt Hon Sir Keith


Biffen, John
Forman, Nigel
Kaberry, Sir Donald


Biggs-Davidson, John
Fowler, Norman (Sutton C'f'd)
Kershaw, Anthony


Blaker, Peter
Fox, Marcus
Kimball, Marcus


Body, Richard
Fraser, Rt Hon H. (Stafford &amp; St)
King, Evelyn (South Dorset)


Boscawen, Hon Robert
Freud, Clement
King, Tom (Bridgwater)


Bottomley, Peter
Fry, Peter
Kitson, Sir Timothy


Bowden, A. (Brighton, Kemptown)
Galbraith, Hon T. G. D.
Knight, Mrs Jill


Boyson, Dr Rhodes (Brent)
Gardiner, George (Reigate)
Knox, David


Bradford, Rev Robert
Gardiner, Edwards (S Fylde)
Lamont, Norman


Braine, Sir Bernard
Gilmour, Rt Hon Ian (Chesham)
Langford-Holt, Sir John


Brittan, Leon
Gilmour, Sir John (East Fife)
Latham, Michael (Melton)


Brocklebank-Fowler, C.
Glyn, Dr Alan
Lawrence, Ivan


Brooke, Peter
Godber, Rt Hon Joseph
Lawson, Nigel


Brotherton, Michael
Goodhart, Philip
Lester, Jim (Beeston)


Bryan, Sir Paul
Goodlad, Alastair
Lewis, Kenneth (Rutland)


Buchanan-Smith, Alick
Gorst, John
Loveridge, John


Buck, Antony
Gow, Ian (Eastbourne)
Luce, Richard


Budgen, Nick
Gower, Sir Raymond (Barry)
McAdden, Sir Stephen


Bulmer, Esmond
Grant, Anthony (Harrow C)
MacCormick, Iain


Burden, F. A.
Gray, Hamish
McCrindle, Robert


Butler, Adam (Bosworth)
Griffiths, Eldon
McCusker, H.


Carlisle, Mark
Grimond, Rt Hon J.
Macfarlane, Neil


Carson, John
Grist, Ian
MacGregor, John


Chalker, Mrs Lynda
Grylls, Michael
MacKay, Andrew (Stechford)


Channon, Paul
Hall-Davis, A. G. F.
Macmillan, Rt Hon M. (Farnham)


Churchill, W. S.
Hamilton, Archibald (Epsom &amp; Ewell)
McNair-Wilson, M. (Newbury)


Clark, Alan (Plymouth, Sutton)
Hamilton, Michael (Salisbury)
McNair-Wilson, P. (New Forest)


Clark, William (Croydon S)
Hampson, Dr Keith
Madel, David


Clarke, Kenneth (Rushcliffe)
Hannam, John
Marshall, Michael (Arundel)


Clegg, Walter
Harrison, Col Sir Harwood (Eye)
Marten, Neil


Cockcroft, John
Harvie Anderson, Rt Hon Miss
Mates, Michael


Cooke, Robert (Bristol W)
Haselhurst, Alan
Mather, Carol


Cope, John
Hastings, Stephen
Maude, Angus


Cormack, Patrick
Hayers, Rt Hon Sir Michael
Maudling, Rt Hon Reginald


Costain, A. P.
Hawkins, Paul
Mawby, Ray


Craig, Rt Hon W. (Belfast E)
Hayhoe, Barney
Maxwell-Hyslop, Robin


Crawford, Douglas
Henderson, Douglas
Mayhew, Patrick


Critchley, Julian
Heseltine, Michael
Meyer, Sir Anthony


Crouch, David
Hicks, Robert
Miller, Hal (Bromsgrove)


Crowder F. P.
Higgins, Terence L.
Mills, Peter


Davies, Rt Hon J. (Knutsford)
Hodgson, Robin
Miscampbell, Norman


Dean, Paul (N Somerset)
Holland, Philip
Mitchell, David (Basingstoke)


Dodsworth, Geoffrey
Hooson, Emlyn
Moate, Roger


Douglas-Hamilton, Lord James
Hordern, Peter
Molyneaux, James




Monro, Hector
Rhodes, James R.
Stradling Thomas, J.


Montgomery, Fergus
Ridley, Hon Nicholas
Tapsell, Peter


Moore, John (Croydon C)
Ridsdale, Julian
Taylor, R. (Croydon NW)


More, Jasper (Ludlow)
Rifkind, Malcolm
Tebbit, Norman


Morgan-Giles, Rear-Admiral
Rippon, Rt Hon Geoffrey
Temple-Morris, Peter


Morris, Michael (Northampton S)
Roberts, Wyn (Conway)
Thatcher, Rt Hon Margaret


Morrison, Charles (Devizes)
Rodgers, Sir John (Sevenoaks)
Thomas, Rt Hon P. (Hendon S)


Morrison, Hon Peter (Chester)
Ross, Stephen (Isle of Wight)
Thompson, George


Mudd, David
Ross, William (Londonderry)
Thorpe, Rt Hon Jeremy (N Devon)


Neave, Airey
Rossi, Hugh (Hornsey)
Townsend, Cyril D.


Neubert, Michael
Royle, Sir Anthony
Trotter, Neville


Newton, Tony
Sainsbury, Tim
van Straubenzee, W. R.


Nott, John
St. John-Stevas, Norman
Vaughan, Dr Gerald


Onslow, Cranley
Scott, Nicholas
Viggers, Peter


Oppenheim, Mrs Sally
Shaw, Giles (Pudsey)
Wainwright, Richard (Colne V)


Page, John (Harrow West)
Shelton, William (Streatham)
Wakeham, John


Page, Rt Hon R. Graham (Crosby)
Shepherd, Colin
Walder, David (Clitheroe)


Page, Richard (Workington)
Shersby, Michael
Walker, Rt Hon P. (Worcester)


Paisley, Rev Ian
Silvester, Fred
Wall, Patrick


Pardoe, John
Sims, Roger
Walters, Dennis


Parkinson, Cecil
Sinclair, Sir George
Warren, Kenneth


Pattie, Geoffrey
Skeet, T. H. H.
Watt, Hamish


Penhaligon, David
Smith, Cyril (Rochdale)
Weatherill, Bernard


Percival, Ian
Smith, Dudley (Warwick)
Wells, John


Peyton, Rt Hon John
Smith, Timothy John (Ashfield)
Welsh, Andrew


Pink, R. Bonner
Speed, Keith
Whitelaw, Rt Hon William


Powell, Rt Hon J. Enoch
Spence, John
Whitney, Raymond (Wycombe)


Prentice, Rt Hon Reg
Spicer, Michael (S Worcester)
Wiggin, Jerry


Price, David (Eastleigh)
Sproat, Iain
Wilson, Gordon (Dundee E)


Prior, Rt Hon James
Stainton, Keith
Winterton, Nicholas


Pym, Rt Hon Francis
Stanbrook, Ivor
Wood, Rt Hon Richard


Raison, Timothy
Stanley, John
Young, Sir G. (Ealing, Acton)


Rathbone, Tim
Steel, Rt Hon David
Younger, Hon George


Rees, Peter (Dover &amp; Deal)
Steen, Anthony (Wavertree)



Rees-Davies, W. R.
Stewart, Rt Hon Donald
TELLERS FOR THE AYES:


Reid, George
Stewart, Ian (Hitchin)
Mr. Spencer Le Marchant and


Renton, Rt Hon Sir D. (Hunts)
Stokes, John
Mr. Michael Roberts.


Renton, Tim (Mid-Sussex)






NOES


Abse, Leo
Colquhoun, Ms Maureen
Ford, Ben


Allaun, Frank
Concannon, J. D.
Forrester, John


Anderson, Donald
Conlan, Bernard
Fowler, Gerald (The Wrekin)


Archer, Rt Hon Peter
Cook, Robin F. (Edin C)
Fraser, John (Lambeth, N'w'd)


Armstrong, Ernest
Corbett, Robin
Freeson, Rt Hon Reginald


Ashley, Jack
Cowans, Harry
Garrett, John (Norwich S)


Ashton, Joe
Cox, Thomas (Tooting)
Garrett, W. E. (Wallsend)


Atkins, Ronald (Preston N)
Craigen, Jim (Maryhill)
George, Bruce


Atkinson, Norman
Crawshaw, Richard
Gilbert, Dr John


Bagier, Gordon A. T.
Crowther, Stan (Rotherham)
Ginsburg, David


Barnett, Guy (Greenwich)
Cryer, Bob
Golding, John


Barnett, Rt Hon Joel (Heywood)
Cunningham, Dr J. (Whiteh)
Gould, Bryan


Bates, Alf
Davidson, Arthur
Gourlay, Harry


Bean, R. E.
Davies, Bryan (Enfield N)
Graham, Ted


Benn, Rt Hon Anthony Wedgwood
Davies, Denzil (Llanelli)
Grant, George (Morpeth)


Bennett, Andrew (Stockport N)
Davies, Ifor (Gower)
Grant, John (Islington C)


Bidwell, Sydney
Davis, Clinton (Hackney C)
Grocott, Bruce


Bishop, Rt Hon Edward
Deakins, Eric
Hamilton, W. W. (Central Fife)


Blenkinsop, Arthur
Dean, Joseph (Leeds West)
Hardy, Peter


Boardman, H.
Dell, Rt Hon Edmund
Harrison, Rt Hon Walter


Booth, Rt Hon Albert
Dempsey, James
Hart, Rt Hon Judith


Boothroyd, Miss Betty
Dewar, Donald
Hattersley, Rt Hon Roy


Bottomley, Rt Hon Arthur
Doig, Peter
Hayman, Mrs Helene


Boyden, James (Bish Auck)
Dormand, J. D.
Healey, Rt Hon Denis


Bradley, Tom
Douglas-Mann, Bruce
Heffer, Eric S.


Bray, Dr Jeremy
Duffy, A. E. P.
Hooley, Frank


Broughton, Sir Alfred
Dunn, James A.
Horam, John


Brown, Hugh D. Provan)
Dunnett, Jack
Howell, Rt Hon Denis (B'ham, Sm H)


Brown, Robert C. (Newcastle W)
Eadie, Alx
Hoyle, Doug (Nelson)


Buchan, Norman
Edge, Geoff
Huckfield, Les


Buchanan, Richard
Ellis, John (Brigg &amp; Scun)
Hughes, Rt Hon C. (Anglesey)


Callaghan, Rt Hon J. (Cardiff SE)
English, Michael
Hughes, Robert (Aberdeen N)


Callaghan, Jim (Middleton &amp; P)
Ennals, Rt Hon David
Hughes, Roy (Newport)


Campbell, Ian
Evans, Fred (Caerphilly)
Hunter, Adam


Canavan, Dennis
Evans, Gwynfor (Carmarthen)
Irvine, Rt Hon Sir A. (Edge Hill)


Cant, R. B.
Evans, Ioan (Aberdare)
Irving, Rt Hon S. (Dartford)


Carmichael, Neil
Evans, John (Newton)
Jackson, Colin (Brighouse)


Carter, Ray
Ewing, Harry (Stirling)
Jackson, Miss Margaret (Lincoln)


Carter-Jones, Lewis
Faulds, Andrew
Janner, Greville


Cartwright, John
Fernyhough, Rt Hon E.
Jay, Rt Hon Douglas


Castle, Rt Hon Barbara
Fitt, Gerard (Belfast W)
Jeger, Mrs Lena


Clemitson, Ivor
Flannery, Martin
Jenkins, Hugh (Putney)


Cocks, Rt Hon Michael (Bristol S)
Fletcher, L. R. (Ilkeston)
John, Brynmor


Cohen, Stanley
Fletcher, Ted (Darlington)
Johnson, James (Hull West)


Coleman, Donald
Foot, Rt Hon Michael
Jones, Alec (Rhondda)







Jones, Barry (East Flint)
Morris, Rt Hon J. (Aberavon)
Stallard, A. W.


Jones, Dan (Burnley)
Moyle, Roland
Stewart, Rt Hon M. (Fulham)


Judd, Frank
Mulley, Rt Hon Frederick
Stoddart, David


Kaufman, Gerald
Murray, Rt Hon Ronald King
Stott, Roger


Kelley, Richard
Newens, Stanley
Strauss, Rt Hon G. R.


Kerr, Russell
Noble, Mike
Summerskill, Hon Dr Shirley


Kilroy-Silk, Robert
Oakes, Gordon
Swain, Thomas


Kinnock, Neil
Ogden, Eric
Taylor, Mrs Ann (Bolton W)


Lambie, David
O'Halloran, Michael
Thomas, Dafydd (Merioneth)


Lamborn, Harry
Orbach, Maurice
Thomas, Jeffrey (Abertillery)


Lamond, James
Orme, Rt Hon Stanley
Thomas, Mike (Newcastle E)


Latham, Arthur (Paddington)
Ovenden, John
Thomas, Ron (Bristol NW)


Lee, John
Owen, Rt Hon Dr David
Thorne, Stan (Preston S)


Lestor, Miss Joan (Eton &amp; Slough)
Padley, Walter
Tierney, Sydney


Lever, Rt Hon Harold
Park, George
Tilley, John (Lambeth, Central)


Lewis, Arthur (Newham N)
Parker, John
Tinn, James


Lewis, Ron (Carlisle)
Pavitt, Laurie
Tomlinson, John


Litterick, Tom
Pendry, Tom
Tomney, Frank


Lomas, Kenneth
Perry, Ernest
Torney, Tom


Loyden, Eddie
Phipps, Dr Colin
Tuck, Raphael


Luard, Evan
Price, C. (Lewisham W)
Urwin, T. W.


Lyon, Alexander (York)
Price, William (Rugby)
Varley, Rt Hon Eric G.


Lyons, Edward (Bradford W)
Radice, Giles
Wainwright, Edwin (Dearne V)


Mabon, Rt Hon Dr J. Dickson
Rees, Rt Hon Merlyn (Leeds S)
Walker, Harold (Doncaster)


McCartney, Hugh
Richardson, Miss Jo
Walker, Terry (Kingswood)


McDonald, Dr Oonagh
Roberts, Albert (Normanton)
Ward, Michael


McElhone, Frank
Roberts, Gwilym (Cannock)
Watkins, David


McGuire, Michael (Ince)
Robinson, Geoffrey
Watkinson, John


MacKenzie, Rt Hon Gregor
Roderick, Caerwyn
Weetch, Ken


Mackintosh, John P.
Rodbers, George (Chorley)
Weitzman, David


Maclennan, Robert
Rodgers, Rt Hon William (Stockton)
Wellbeloved, James


McMillan, Tom (Glasgow C)
Rooker, J. W.
White, Frank R. (Bury)


McNamara, Kevin
Roper, John
White, James (Pollock)


Madden, Max
Rose, Paul B.
Whitehead, Philip


Magee, Bryan
Ross, Rt Hon W. (Kilmarnock)
Whitlock, William


Mahon, Simon
Rowlands, Ted
Wigley, Dafydd


Mallalieu, J. P. W.
Ryman, John
Willey, Rt Hon Frederick


Marks, Kenneth
Sandelson, Neville
Williams, Rt Hon Alan (Swansea W)


Marshall, Dr Edmund (Goole)
Sedgemore, Brian
Williams, Alan Lee (Hornch'ch)


Marshall, Jim (Leicester S)
Selby, Harry
Williams, Rt Hon Shirley (Hertford)


Mason, Rt Hon Roy
Sever, John
Wilson, Rt Hon Sir Harold (Huyton)


Meacher, Michael
Shaw, Arnold (Ilford South)
Wilson, William (Coventry SE)


Mellish, Rt Hon Robert
Sheldon, Rt Hon Robert
Wise, Mrs Audrey


Mendelson, John
Shore, Rt Hon Peter
Woodall, Alec


Mikardo, Ian
Short, Mrs Renée (Wolv NE)
Woof, Robert


Millan, Rt Hon Bruce
Sillars, James
Wrigglesworth, Ian


Miller, Dr M. S. (E Kilbride)
Silverman, Julius
Young, David (Bolton E)


Mitchell, Austin
Skinner, Dennis



Molloy, William
Smith, John (N Lanarkshire)
TELLERS FOR THE NOES:


Moonman, Eric
Snape, Peter
Mr. James Hamilton and


Morris, Alfred (Wythenshawe)
Spearing, Nigel
Mr. Joseph Harper.


Morris, Charles R. (Openshaw)
Spriggs, Leslie

Question accordingly agreed to.

Mr. Peter Rees: I beg to move Amendment No. 9, in page 10, line 20, leave out from 'exceeds' to 'of' in line 22 and insert
'£2,000 at the additional rates of 10 per cent. for the first £500'.

The Temporary Chairman (Mrs. Joyce Butler): With this we may take the following amendments: No. 10, in page 10, line 21, leave out '£1,700' and insert '£2,000'.
No. 11, in page 10, line 21, leave out from 'cent.' to end of line 22.
No. 12, in page 10, line 22, leave out '£550' and insert '£500'.
No. 18, in page 10, line 26, leave out from second 'the' to end of line 27 and insert
'reference to £2,000 of a reference to £3,000'.

Mr. Rees: This is a modest amendment. After the traumas of the last five hours and the debate on Monday, that is perhaps as well. It will give the Government a chance to collect themselves, to reconsider their position and to view for the first time in their career a little more dispassionately than they have been used to doing in the past the whole question of investment income.
When I consider the amendment, to echo the words of Lord Clive in rather different circumstances, I am astounded at my own moderation. It is perhaps important to give the Government a chance to calm themselves and to consider again this whole question.
The amendment is designed to raise the threshold for investment income surcharge for those under the age of 65 from £1,700 to £2,000 and for those of 65 and over from £2,500 to £3,000. As I said, I


hope that it will enable us to debate calmly and dispassionately the weight of tax which we feel should be imposed on investment income.
I know that the whole question of investment income, at least in public if not in private, touches a raw nerve in the Labour Party. Investment income conjures up for Labour Members, particularly those below the Gangway, vast plutocratic wealth which deserves to be taxed into the ground. But we know that, in private at least, the Government Front Bench take a slightly different view. We wish to probe the sincerity of their approach to the role of private capital in a mixed economy.
Even if one felt that investment income as properly defined was deserving of the particularly harsh imposts which have been heaped upon it since 1974, it must almost be a matter of common ground that the definition is extremely haphazard. Indeed, the anomalies have been pointed out from an early stage. Mr. Gladstone in 1853, as you will recall, Mrs. Butler, in an epic debate—I am not suggesting that you personally were presiding over our debates in those days, but I know of the close attention that you pay to all debates on financial and fiscal matters—attempted to draw a distinction between what he called lazy income and hard-won income. At the end of the day he admitted that it was impossible to draw a very clear line. In a, memorable debate, Mr. Gladstone—I know that the hon. Member for Cornwall, North (Mr. Pardoe) will be treading in Mr. Gladstone's footsteps tonight because of the support he will be giving to the amendment—recognised that there was no clear, decisive, practical distinction between the two categories of income.
Perhaps the debate has not moved on a great deal since then. The anomalies are too glaring to admit of this sharp distinction. I am sure that the Financial Secretary, if and when he catches your eye, Mrs. Butler—or it may be the Chief Secretary—will attempt to deal with this matter. We always welcome the Chief Secretary's interventions, particularly because in his professional capacity he has such a keen and expert knowledge of the distinctions between the various categories of incomes. I have no doubt that we shall have a notable and sympathetic contribution to the debate. It will

give him a chance to re-establish his self-esteem after the disasters which have struck him and his team just recently and on Monday.
9.30 p.m.
But we bear the right hon. Gentleman no ill will. I do not know whether his heart is in the right place, but his head is in the right place provided that he is given the chance to exercise it. We know also, however, that he can be a little intimidated by his right hon. and hon. Friends below the Gangway. There have been moments when I have detected even that bold spirit quail before the glances of his hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) or those of his hon. Friend the Member for Coventry, South-West (Mrs. Wise). There is only one of them in the Chamber at the moment, so perhaps we can encourage the right hon. Gentleman to flights of unaccustomed valour.
I wish to focus the Committee's attention on some of the categories of income which by no stretch of the imagination can be called, in Mr. Gladstone's phrase, lazy income. First, I take the case of the shopkeeper and the farmer, people who by any standards work hard all their lives but whose efforts may not produce very large incomes, so that they cannot take advantage of the retirement annuity provisions. When they come to take an easier role in life and sell their shops or farms, they realise a small amount of capital and invest it.
Is the income from those investments to be treated more harshly than, for example, the income of a civil servant—I pick a category at random—who has an inflation-proof pension which, under the rather bizarre rules by which the Inland Revenue operates, is regarded as earned income?
Next, I take the case of people who have had to save for their retirement. The Committee will recall that prior to 1956 it was not possible for the self-employed or even for those who were not in pensionable employment to make provision out of gross income for their retirement annuities. There must be many people today who are subsisting on savings income who could not make that provision. Are they to be singled out for harsher treatment? I am sure that the Chief Secretary, with his compassion—if he can for a moment break off his


conversation with the Financial Secretary—will agree, and when he speaks later he will, no doubt, endorse what I say. Perhaps, even if he is not able to go all the way with us on these amendments, he will be prepared to commit the Government to look a little more closely at the definition of earned and investment income.
Next, let us take the case of a person who has bought his own house but who, through the demands of his employment, has to move to another part of the country. He retains his house and lets it. Is the income from his house to be regarded, in Mr. Gladstone's phrase, as lazy income?
The fact that these anomalies occur has been practically conceded by the Government, first in the provision introduced in this year's Finance Bill to treat maintenance payments exclusively as earned income. There is an anomaly which has been corrected, against—I draw the Committee's attention to this—the statements in Labour's 1976 manifesto which described maintenance payments as a rather virulent form of tax avoidance. I am happy to see that the Chief Secretary has escaped from the thrall of Transport House and has taken a rather more generous view of maintenance payments. I am sure that the Gingerbread group and others outside who follow our debates will give him full credit for that. I am now asking him to extend his horizons a little and see whether he can accord the same kind of treatment to other forms of income.
Next, what about annuities to retired partners of professional firms? A small measures of relief has been conceded in past Finance Acts for income of this kind. When we go into Standing Committee we shall press the Chief Secretary to look at this matter further. He may have to declare a personal interest, but we shall respect him all the more for that. It will demonstrate that he has a warm personal and enduring interest in these problems.
Even if the definition of earned and investment income could be accurately and comprehensively drawn, what case is there for singling out investment income—to spare the susceptibilities of Labour Members, let me call it savings income

from now on—for the special treatment which it now receives?
When Mr. McKenna was defending the decision of the Liberal Administration in 1907 to introduce the earned income relief, he rested his case on the argument that income from employment was of a precarious nature. Since then, times have changed and a little has been done to make employment less precarious. We have had the Employment Protection Act and redundancy payments. I do not mean to say that income from employment is necessarily of the same quality or on the same basis as savings income which is perhaps derived from capital. But the contrast is not as stark as it was in 1907. Some would say that the balance has tilted the other way.

Mr. Ridley: Hear, hear.

Mr. Rees: My hon. Friend will no doubt enlarge on that later. One could make an eloquent case. The fluctuations of the Stock Exchange and the ravages of inflation have meant that the return on many fixed income stocks has been a negative return after tax. This is a matter to which the Chief Secretary must address himself if he is to do justice to the debate.
I turn to the question of dividend control and the rentier class. That is a highly emotive phrase which I use to galvanise and evoke a spark of interest from the Chief Secretary, who seems to be singularly detached from our debate. I hope that he will deal with this matter, however ineffectively. Perhaps he will be a little more forthcoming on the question of dividend control. At Chancellor of the Exchequer's Question Time recently we had occasion to press the Minister of State, but there was no firm indication of the Government's plans. This is a factor which has militated against savings income.
I wonder whether the Government will put up a substantial opposition to these amendments. After the traumas of the last five hours, they may collapse. Perhaps the walls of Jericho are lying in ruins. Perhaps the trumpet blasts of my hon. Friends have demolished them. Perhaps we shall find that from now on it is plain sailing and that it will now be not a Cornish Budget but possibly a Conservative Budget.
Much work has to be done, and we shall carry this on not only in the Chamber but in Committee upstairs. We shall see with keen interest what happens. I know that the Patronage Secretary's representative has a difficult task. He has done his best to weed out his team, and, I have no doubt, with a certain amount of disloyal support. We shall comment on that performance later. It appears that he has effectively cleared the Chamber after the last debate, Mrs. Butler—I apologise: I should have said Mr. Godman Irvine. My eyes were so riveted on the Treasury Front Bench that I momentarily failed to observe that you were adding grace and distinction to our debate.
I suspect that the case that we shall have to meet from the Treasury Bench is encapsulated in a quotation from Mr. Brian Walden, whose contributions to our debates I for one miss. But he is doing a useful job in interviewing the Chancellor of the Duchy of Lancaster. May there be many more such cross-examinations, because they provide us with an insight into at least part of the Cabinet's thinking.
The phrase which Mr. Brian Walden used to quote was attributable to Mr. Joseph Chamberlain. It was "What ransom should property pay for the security that it enjoys?" That is a telling phrase. I do not know whether Mr. Chamberlain would have repeated it these days. The proposition is readily answered. First, I doubt whether property or private capital could be said to enjoy much security, certainly not under an Administration where the Treasury is in the hard, rapacious hands of the Chancellor of the Exchequer.

The Chancellor of the Exchequer (Mr. Denis Healey): rose—

Mr. Rees: I am flattered that the Chancellor cowers under my lash. If he must, he must leave the Chamber. I have the great privilege of sharing the Chancellor's kisses with the hon. Member for Coventry, South-West. I should prefer the Chancellor's fiscal concessions to his kisses. But perhaps I am not in a position to choose. We have to wring the concessions out of him by hard verbal argument and by votes. It is not the Chancellor's good will that lies behind

such concessions as we have extracted so far.
The question I put to the Committee is "Does capital in the United Kingdom pay its fair share of taxes?" One has only to study the question to see that it answers itself.

Mr. Robert Hughes: The answer is "No".

Mr. Rees: Perhaps the hon. Member for Aberdeen, North (Mr. Hughes) has not been paying close enough attention to our debates. Perhaps he does not study the Finance Acts. Has he considered the rates of stamp duty here, which are higher than in any other country in the EEC? Take capital transfer tax. Can he mention any other of our competitor countries in the EEC with tax on the transmission of capital at anything like the same rates? Can he mention a country in the EEC that imposes a charge on capital gains at the same swingeing rates as here?
One of the Chief Secretary's most revealing asides in our debates on the Budget was when he revealed that, of a forecast yield of £390 million from capital gains tax, £340 million of £350 million would derive from inflationary gain. In other words, the real gain of the tax yield is only £40 million or £50 million. That gives one a measure of the impost on capital. If I may, therefore, echo what Mr. Joseph Chamberlain said 70 or 80 years ago, yes, the ransom that capital pays in the United Kingdom is far beyond the ransom exacted by any other civilised Western European Government. One has only to study the statistics to see that capital taxes in the United Kingdom are far higher than those levied by any of our European competitors.
The consequences are inevitable. There is a slow but steady seepage of private capital, and that is why the Labour Party in its ineffable wisdom has sent two of its most distinguished Back Benchers to spy out the land in the Channel Islands. What comfort they have brought back, I do not know. Perhaps the Chief Secretary will tell us that something is to be incorporated in the next manifesto. It may be that the Government will revoke the constitution of the Channel Islands and that the Duchy of Normandy is to be once more incorporated totally and irrevocably under the


British Crown for all purposes. I do not know. It will be interesting to follow out this theme. If my fancy takes me too far, perhaps the Chief Secretary will correct me. Perhaps he will say that the Channel Islands and the Isle of Man are to enjoy inviolate their present fiscal systems.
At the end of the day, notwithstanding the exchange control system which has been so laboriously and painstakingly erected, it will not be possible to confine private capital within this country if we are to endure taxation such as we now have. The fundamental question that the country will ask is whether the Government are serious about a role for private capital in our mixed economy. There have been glib statements about an investment strike. Labour Members may wish to develop that theme. Perhaps that is something upon which the Wilson Committee will produce words of consummate wisdom. If there has been an investment strike—and I do not know that I necessarily go along with that proposition—it is not hard to find one of the reasons for it. If in an era of inflation a person is receiving a negative return on his capital, he will find rather curious forms of investment to preserve such wealth as is left to him.
I assume that the Government are serious and that they are not as frivolous as their Back Benchers, particularly in the last five hours, would have had us believe. I believe that the Government see a modest role for private capital, and the earnest of that is the provision for share incentive schemes encapsulated in the Bill. I and some of my right hon. and hon. Friends feel that these provisions need fairly dramatic improvement. But it is the first indication we have had that the Government believe that capital should be diffused among the country's taxpayers.
If that is the Government's aim and object, all sorts of questions arise for our consideration. I ask the Chief Secretary whether the dividends paid to employees who participate in share incentive schemes are to be treated as earned or investment income. It is an interesting question. We shall be glad to have the Chief Secretary's views on the matter. If his view is that in the hands of an employee dividends will be treated as earned income, what

happens in the case of a retired employee? Will he, on retirement, when he has greater need of that income than ever before, be subject to the investment income surcharge?
9.45 p.m.
I sense that the Government must be a little uneasy about this position, and rightly so. Although one might not guess it from the expression on the Chief Secretary's face, the Government are proposing an increase in the threshold for the 10 per cent. band both for those under and for those over the age of 65. All we are doing, in a modest way, is suggesting that possibly those thresholds could be raised a little higher. If the Chief Secretary wants an argument that might impress even his hon. Friends below the Gangway, it is the ravages of inflation since my noble Friend Lord Barber set the threshold in 1973–74 at £2,000. Merely to index that would probably increase it to £4,400.
If the Chief Secretary attempts to dazzle us with the cost of that, and we doubt some of the figures that have been produced particularly on his costings and his enumeration of the employees of the Inland Revenue, we have the advantage of the letter written by the Financial Secretary in April which tells us how modest the cost will be. The Chief Secretary will no doubt tell us about the bachelors with £50,000 of investment income. That has been a mythological figure trotted out in our debates since the late Hugh Gaitskell addressed the Committee on these matters.
Leaving aside those rare creatures—they become rarer under a Labour Administration—I ask the Committee to consider the case of a married couple over the age of 65 whose entire income consists of the old-age pension and savings income of £2,500 per annum—in other words, a gross income of just over £4,000, or £80 a week. That is slightly under the average industrial wage. Even with the benefit of the Government's proposals, that couple will be paying a marginal rate of tax of 33 per cent. basic rate and 10 per cent investment income surcharge, amounting to 43 per cent.
Let us assume that that couple have invested their modest capital wisely and have increased their savings income by £500 to £4,600—a weekly income of £92


a week. By no stretch of the imagination in the present circumstances is that the income even of someone in middle management. They will be paying a marginal rate of 48 per cent. As the Chief Secretary can readily calculate, to produce an income of £2,500 to £3,000 a year would need capital of only £30,000. All we are asking of the Chief Secretary is a little imagination and generosity.
The amendments tabled by myself and my right hon. and hon. Friends are designed to raise the threshold from £2,000 to £2,500 for people under the age of 65 and to £3,000 for those over the age of 65. As to cost, we are deeply conscious of our responsibilities. We have been consistently reminded of them by the Treasury Front Bench. The Financial Secretary has told my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) that our proposals would cost £5 million this year and £30 million in a full year. Will the Chief Secretary really try to tell us that it is beyond the wit of him and his colleagues to find £5 million this year or that their control of Government expenditure is so lax that they cannot even find cuts of £5 million out of a Budget of about £60 billion? I do not think that that argument will run.
It is a question of nerve and generosity—nerve so that the Chief Secretary can face the accusing eyes of his hon. Friends and of Mr. Jones and Mr. Scanlon, though they no longer preside in such an omnipotent way over the affairs of the Labour Party, and generosity to recognise a real case and that many of those who would benefit from the amendments are in retirement. It may even be that if the Chief Secretary searches in his constituency he will find some people who would benefit from the amendments.
In coaxing the Treasury team along this line which should not be a difficult line for them to follow, I urge them to recall the entrepreneur under the railway arch who proved so dear to their right hon. Friend the Chancellor of the Duchy of Lancaster on the last day of the Budget debate. We owe a great deal to the contributions of the right hon. Gentleman, because it is clear that his heart is in the right place and that often his head is in the right place. It is unfortunate that he seems to be a lone voice in the Cabinet. His vote is too often in the wrong place, but we all know of the compelling fascina-

tion of Patronage Secretaries and, alas, the Chancellor of the Duchy is not immune from that.
We ask the Chief Secretary to accept the amendments on the basis that they would afford a measure of ease to the entrepreneur under the railway arch in his old age, a measure of security to his widow and perhaps a stimulus to his children to follow in his footsteps. On that modest, circumscribed basis, I commend the amendments.

Mr. Joel Barnett: It might be helpful if I said a word or two now about the speech of the hon. and learned Member for Dover and Deal (Mr. Rees). In view of the hour, I hope that the Committee will forgive me if, rather than following the hon. and learned Gentleman into the speeches of Gladstone and Chamberlain, or travelling to the Isle of Man and the Channel Islands, I seek to deal with the amendments.
The costs of the Conservative amendments, which are partially supported by the Liberals, are broadly in the area that the hon. and learned Gentleman suggested. He complained about the figures that we have given to the Committee, but on the last group of amendments his right hon. and learned Friend thought that the amendment that he was moving would cost £45 million and found that it would actually cost £150 million. Yet he still pressed it to a vote. I am surprised that the hon. and learned Gentleman should complain about the figures that we have provided.
In Amendment No. 11, the Liberal Party, as ever, seeks to do rather more, namely, to abolish the 15 per cent. rate altogether. That would cost £120 million, compared to the fairly modest cost of the Conservatives' amendments.
I agree that small investment income should be helped, though there is some disagreement in the Committee on the definition of "small" in these matters. I accept that small investment income should be exempt from the investment income surcharge. We have helped those with small investment incomes in the amendments that we proposed in the Budget, which are now part of the Finance Bill.
There are 600,000 people liable to investment income surcharge; 91 per cent. of those with investment income pay no surcharge. Only 2 per cent. will be liable


at the 10 per cent. rate and 7 per cent. at the 15 per cent. rate. By any definition, we have exempted the vast majority of those with investment incomes, and certainly all those with small investment income.
I am surprised that the hon. and learned Member for Dover and Deal should have made so much of this. A person over 65 can have £30,000 of capital, allowing the equivalent of building society gross rate, without being liable to investment income surcharge. Those under 65 can have capital of £20,000, taking the same building society interest rate. I know that these sums are nothing to Opposition Members, who think that they are still far too low, but to the vast majority of ordinary people in this country these are still very large sums of money. We have exempted these incomes from the surcharge and, in addition, we have done what no previous Conservative Government ever did—we have wholly exempted maintenance income from the surcharge.

Mr. Anthony Nelson: Perhaps the Chief Secretary could help me. When he talks about the multiple of this investment income and totals it into a gross capital value, does he take into account the fact that many people receive investment income by way of life interest on capital on which they have no chance of getting their hands? To talk of capital values in such cases is totally meaningless. All these people will have for the whole of their lives is income from the capital amount which will not belong to them.

Mr. Barnett: I do not dispute that. I have not covered every conceivable form of investment income. All I am saying is that for the vast majority of people there will be exemptions from investment income surcharge. This will apply to a capital sum of £30,000 for those over 65 and £20,000 for those under. I do not dispute the hon. Member's point about life interests and trusts of this kind, but they are not quite as common as he thinks. I suppose that I have some people in my constituency with life interests in trusts, but they would not be all that many.
The question raised by the hon. and learned Member for Dover and Deal was whether there should be a distinction be-

tween investment income and earned income. The previous Conservative Chancellor, Lord Barber, said there should be such a distinction. He said:
it will still be necessary to retain the distinction between earned and investment income."—[Official Report, 31st March 1971; Vol. 814, c. 1387.]
The hon. and learned Member for Dover and Deal says that there should be no distinction at all. Apparently the Conservative Opposition agree with him, because a week ago they voted to abolish the investment income surcharge on a Ten-Minute Bill. They have changed their view. Apparently they do not agree with Lord Barber. There is no great virtue in consistency and I do not complain about their change of view, but let us remember that it was a Conservative Government that introduced the investment income surcharge, with the unification of the tax system.

10.0 p.m.

Mr. Peter Rees: Does the right hon. Gentleman feel that the investment income surcharge could ride very easily with a wealth tax? Does he see a case for both?

Mr. Barnett: I shall deal with that question now, although I do not like my remarks being taken out of order. Of course, if there were a wealth tax it would depend where the threshold was fixed and whether and to what extent there was in investment income surcharge. However, I concede that with a wealth tax with the kind of threshold envisaged by the hon. Member for Cornwall, North (Mr. Pardoe), it would not be reasonable also to have a surcharge. But we are not talking about that, because we do not have a wealth tax.
The hon. and learned Member for Dover and Deal says that there should be no distinction between earned and what he called savings incomes. Not all investment income is necessarily savings income, of course. Some is inherited income—some is even income stolen in years past. The simple definition of savings is an exaggeration and an oversimplification. But we know what we mean. We are talking about the difference between income earned in a job or a business and income received from rent or investment.
The Opposition apparently now believe that there should be no distinction. What has happened since 1972, when the then Conservative Government introduced the distinction, to change the principle? I know the arguments about where the line should be drawn, but what has changed the principle? The hon. and learned Gentleman did not tell us anything that has changed.
Last year, the hon. Member for Cornwall, North, while saying that he did not necessarily accept the arguments for the distinction, gave many reasons for it. He said:
When we introduced our system, we did so on the basis that the investment income conferred on the beneficiary some advantage over and above the advantage conferred upon him by income from work.
He went on to say that
in distinguishing between these two sorts of income an investment income confers a benefit because it is more permanent than income from work. A job could cease, or a man could become sick, or his working life could end. Income from investment would continue through all those circumstances."—[Official Report, 10th May 1977; Vol. 931, c. 1205.]
In fairness, the hon. Gentleman said that he no longer accepted those arguments, but he did not say why.
In the same debate, the hon. and learned Member for Dover and Deal, as he has done today, but not to the same degree, listed a series of anomalies within the system. But they all existed when Lord Barber introduced the distinction. What has changed?

Mr. Alan Clark: One thing that has changed is that we have suffered inflation rates unprecedented this century.

Mr. Barnett: With respect, that is a question of where the line should be drawn; it does not answer the question whether there should be a distinction. The answer could be simple—that the Conservatives are now in opposition.
There is a distinction not just in this country or under the previous Conservative Government. There is a distinction in many other countries, whether by means of a wealth tax or by giving extra relief to earned income, as we used to do before the Conservatives introduced the unified tax system. There was such a distinction in this country, and the Conservatives who introduced it favoured its maintenance. The very foundation of

the unified tax system envisaged that some investment income should attract surcharge.
What has happened to change that distinction? We are entitled to be given the answer by the Opposition. They voted en bloc on a Ten-Minute Bill to abolish the surcharge. Tonight they are attempting to be a little more responsible. In view of their irresponsibility in the last two votes in Committee, it is somewhat surprising that they are now seeking to be more responsible. Obviously they agree in principle with the abolition of the surcharge. When it does not matter, on a Ten-Minute Bill, that is all right, but when it matters, such as in this debate, they are not prepared to advocate it.
Certainly the hon. and learned Member for Dover and Deal this evening did not advocate abolition. I do not understand why he did not advocate it. Perhaps he still has some lingering sympathy with what was said by Lord Barber on 21st March 1972. The noble Lord then said that
One of the foundations of the unified tax system is that only the larger investment incomes should attract the surcharge."—[Official Report, 21st March 1972; Vol. 833. c. 1386.]
I concede that he had in mind a higher figure, but he maintained a distinction that is now no longer accepted by the Opposition.
I believe that the exemption of 91 per cent. of those with investment income goes a long way to meet the question where the line should be drawn. The other argument that the hon. and learned Gentleman did not deploy today relates to the disincentive to savings.

Mr. Terence Higgins: Since the right hon. Gentleman appears to be prepared to consider where the line should be drawn, will he say where the line he is drawing compares in real terms with the line that was drawn by Lord Barber when we first introduced this concept?

Mr. Barnett: I am happy to concede that it is drawn lower. I accept that the point at which I consider the line should be drawn is different from the Opposition's view. But what the Opposition have not argued is whether there should be a distinction at all. I have said that we have exempted from investment


income surcharge the vast majority of people on small incomes. I concede that I would draw the line at a lower investment figure and a lower capital figure than would the Opposition. [HON. MEMBERS: "Why?"] Because I consider that we have done enough in terms of equity so far.
The hon. and learned Gentleman also mentioned what is known as the investment strike. The argument is that because of the level of taxation on investment income, people will not save. In other words, there is a disincentive to save. No doubt the hon. and learned Gentleman did not make that point because he has probably seen the figures; he mentioned the matter in passing. I am glad that he did not make that point, and I shall make the position clear in case other Members wish to deal with it. In 1973 the personal savings ratio under the Conservative Government was 11·6 per cent.; in 1977 it was 14·6 per cent. One can do almost anything with figures, and I have probably done a fair bit in my time. But one thing that one cannot do with those figures is to prove that there is an

investment strike or a disincentive to save because of the point at which the line has been drawn on the investment income surcharge.
I believe that where we have drawn the line now ensures that 91 per cent. of people with investment income will not pay the surcharge, and that is a not unreasonable line. To answer the hon. Gentleman, I accept that people with investment incomes have made some sacrifices over recent years because of the levels of inflation. I do not deny that at all. But many people with earned incomes have also made sacrifices—people with very low levels of earned income.
We in the House of Commons must draw up our priorities on levels of income and how and where we help particular levels. Having helped so large a proportion of those with investment income, I cannot believe that the Committee would now want, in a full year, to forgo approximately another £30 million, on the Opposition amendment, or certainly the £120 million of the understandably more extravagant amendment of the hon. Member for Cornwall, North. I therefore ask the Committee to reject both amendments.

Mr. Paul Dean: The Chief Secretary has made a very disappointing response to the powerful case made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) in moving this modest amendment. The right ron. Gentleman did not address himself at all to the anomalies and unfairnesses that exist in the present arrangement. He relied almost wholly on the negative argument that the investment income surcharge exists and, therefore, should continue to exist.
I want briefly to put to the Chief Secretary one or two points which strongly suggest to me that the present position is very inequitable as between various people, particularly those who are retired.
I think one can fairly say that, whereas in earlier debates on the Bill we talked about the poverty trap and the disincentive effect for those on middle incomes of the tax they are paying on their incomes, we are now talking about the savings trap, which catches people when they are most vulnerable. It catches them when they are retired and have lost their earning capacity. Many of them are on fixed incomes which are being eroded year by year by inflation. They are finding that the thrift and the saving in which they engaged, in many cases over a long working life, are turned into tax penalties as a result of the present arrangements.
The taxation on savings is riddled with anomalies, and the investment income surcharge as at present applied makes those anomalies a great deal worse. I do not want to go into them in great detail at this hour of the night. I hope to catch the eye of the Chair shortly to move another amendment which has been selected.
However, I want to give two examples. The worst example of unfairness is to be found among pensioners. Nearly half of those who pay the investment income surcharge are pensioners. There is a marked difference between the tax treatment of the retired person with a private occupational or public service pension and the retired person with savings income subject to investment income surcharge.
At one extreme there is what might be described as the first-class pensioner, with an occupational pension at the maximum allowed by the Inland Revenue and with inflation-proofing. This pension is charged for tax purposes as earned income. At the other extreme there is what I describe as the second-class pensioner, with no occupational pension of any kind, through no fault of his own. He has to make do on his private savings, and he is charged on those savings as so-called unearned income. He is charged at a higher rate on an income which is less secure and which is not inflation-proofed. This is grossly unfair.
10.15 p.m.
Both the occupational pensioner and the person who has his savings in a private investment have in many cases saved all their working lives. In the case of the individual who does not have an occupational pension, it may very well be that the company which employed him did not have a pension scheme. It could be that he was working abroad and was ineligible as a result. It could equally be that he was self-employed or running a family business, and that all his resources during his working life were ploughed back to ensure the success of that business.
It is people of this sort who are suffering, through no fault of their own, as a consequence of their not having occupational pensions. The Chief Secretary in his speech totally failed to address himself to the discrimination which occurs year by year between one type of pensioner, with an occupational pension and all the security which comes from that, and the other type of individual who, through no fault of his own, does not have this type of provision. The result of that is tax at a far higher rate, and in many cases at a lower level of income.
Investment income surcharge bites at a very modest level of income. It should be recognised that 160,000 of those who are liable for the investment income surcharge have incomes below £4,000 a year. Many of these people must be pensioners, with incomes below the average wage, but in all too many cases they find that they are paying a very high rate of tax, which can very quickly reach a marginal rate of 49 per cent.
I shall quote one typical example. I have a constituent who retired some years


ago after a working life of 48 years. He has an income, from pension and from investment, of £4,100 a year. He reckons that last year he and his wife paid in tax over £4 a week more than a married man earning the same amount would pay. I simply do not believe that distortions of this kind in the tax system can any longer be defended. It is for these reasons that I shall support my hon. and learned Friend in the Division Lobby.

Mr. Pardoe: I want to take up some of the points made on these amendments by the Chief Secretary. He said that the Liberals were partially supporting the Opposition amendments. In fact we are wholly supporting the Opposition amendments, because they are very nearly identical to those that we tabled. In addition we are, as the right hon. Gentleman pointed out, supporting an amendment which seeks to reduce the top rate of investment income surcharge from 15 per cent. to 10 per cent.
I agree immediately that in the Budget the Government have made moves in the right direction on investment income surcharge and that those moves are very welcome, but I do not believe that they go far enough and I shall try to spell out my reasons for that view. We support Amendments Nos. 9 and 10, and we shall be seeking to persuade the Government also to reduce the rate of investment income surcharge.
It is absolutely right, as the hon. and learned Member for Dover and Deal (Mr. Rees) said, that investment income surcharge should come in at a higher threshold. Even if we went back to the 1973–74 figure of £2,000, it would now be very much higher than the figure which the Government have proposed in the Bill. It is especially true that this threshold should be quite substantially higher than the Chancellor's boost in the Budget for the retired. It is the retired who draw the major part of investment income.
The Chief Secretary has quoted my previous speech in regard to the theory of investment income surcharge, and there is no need for me to repeat it because the arguments are fairly simple. The hon. and learned Member for Dover and Deal indicated that it came about in 1907 as a result of a need to give earned income relief, but it was renewed only

fairly recently by a Conservative Government when they brought in the unified system of taxation in the early 1970s.
The Chief Secretary, not unnaturally and perfectly legitimately, asked the Conservative Opposition what has changed since then. The hon. and learned Member for Dover and Deal is much more positive, and has been for some time, against investment income surcharge than we hear from other spokesmen on the Conservative Front Bench. What has changed? I suspect that part of what has changed is that the hon. and learned Gentleman served his apprenticeship, as I did, on the Select Committee on wealth tax. On that occasion we listened to the arguments that were advanced ad nauseam and we had to go through the matter in incredible detail. The hon. and learned Gentleman was probably convinced, as I was, that the arguments today for the distinction between one form of income from investment and another form of income from earnings are far less than they were in 1907, for a variety of reasons.
Although the Chief Secretary has not yet got an answer from the Conservative Party as to what has changed, I shall try to spell out some of the arguments. I think that things have changed very substantially. First, why was investment income surcharge introduced? As indicated, it was introduced because it was thought that there was a clear distinction between income from work and income from investment, largely because it was thought that income from investment was more permanent and secure. For example, if one went sick one lost one's earnings from one's work. In 1907, if one became incapacitated for some other reason—industrial injury and so on—that was virtually a catastrophe because one lost almost every part of one's income from earnings. Similarly, income from investment went on after retirement. There again, it was more secure because it went on beyond the work period of one's life.
Does this still apply? My answer is that it does not really apply to anything like the extent as it once did. It is impossible to say that income from investments on the Stock Exchange today is more secure than, say, the income of a permanent secretary to the Treasury. I take that example at random. It is perfectly


true to say that income from investments on the Stock Exchange is more secure than a salary of a Member of Parliament. In general, however, it would be difficult to argue that income from employment is now as insecure as it was in 1907. Certainly, with inflation and all that has happened since, income from investments is not as secure as it was in 1907.
The difference has been blurred very substantially, although I accept that it certainly existed until quite recent times. In any case, it seems to me that the introduction of the investment income surcharge by the Conservative Party and the original introduction of the differential by a Liberal Government in 1907 were fundamentally misconceived. It was fundamentally conceived because it was an attempt to distinguish one form of wealth and another. I think that that is the fundamental mistake which was made in 1907. In other words, we tried to say that we could tax the income from wealth but that we would not tax wealth in any way that did not produce an income.
That distorted the system in favour of the holding of wealth which did not produce income. I suppose that we may have still felt in 1907 that we were so far ahead of the rest of the field in international competitive terms that we could afford to have the loss of wealth lying around idle and not being used to its most productive effect.
I know that this is a difficult subject for many Labour Members. I understand their reasons, and many of their prejudices in this issue I have shared in former periods. It is difficult for some of the so-called Left of politics to understand how anyone can make an argument against investment income surcharge.
I give one illustration of why it is clearly crazy to have it now. It is clearly crazy as between the wealth that a person might have invested in industry and the wealth that he might have decided to put in to the purchase of a Rolls-Royce motor car. If he decided to buy a Rolls-Royce motor car for £20,000 and sold shares in industry worth £20,000 to do so, presumably he would forgo an 8 per cent. return on £20,000, amounting to about £1,600 a year. However, if a person is paying investment income surcharge at the top rate of 98 per cent.—that is quite possible at that level of wealth—the

actual return is 2p in the pound. From a return on the investment of £1,600 there is a net return of only £32. The net cost of transferring £20,000 of investment in industry to consumption in a Rolls-Royce is only £32 a year. That illustrates how crazy investment income surcharge is in present circumstances.
The real distinction is not between one form of income and another but between wealth and income. That is why it is far preferable to abolish the surcharge and to get on with reforming capital taxation. That is not the view of someone who does not care about investment in British industry. Interestingly enough, in the most definitive study of small businesses by Graham Bannock, entitled "The Smaller Business in Britain and Germany", produced under the auspices of the Anglo-German Foundation, it is stated:
Capital Transfer tax and the proposed wealth tax are causing great concern among small business owners. Our research, however, suggests that concern over the effects of capital taxes upon the small business sector as a whole may be exaggerated. The problem in the United Kingdom appears to be one of low birth and growth rates in the small business sector, not of high death rates.
It continues:
If it is true, as it appears to be, that there is more public concern over the qualities of wealth and opportunity, including opportunities to participate in the control of the work situation, than of income, then economic and social interests might well both be served by a shift from the taxation of income to that of consumption and wealth.
I agree entirely with that view. I think that it would fit in with the Government's industrial strategy.
We have the factor that the present investment income surcharge is out of date. In my view, arguments that once applied in its favour no longer apply and we can well look forward to its abolition. That is what the House of Commons should do in its regard for the totality of tax reforms.
We also have the distorting effect of the investment income surcharge between one form of investment and another. The right hon. Member for Down, South (Mr. Powell) said in the debate on Second Reading that income tax is a splendid tax in so far as any tax is splendid—I enter that caveat immediately—because it has a less distorting effect than other taxes. However, it seems that it


has a distorting effect in many ways, especially between one form of investment and another.
We have the fact that investment income, if one invests privately in industry, in a small business, on the Stock Exchange or wherever, is taxed at extremely high rates, whereas if the money is invested in a pension fund through institutional means the surcharge is escaped and there is a host of other tax advantages built into the whole pension fund system. For that reason, far too much of the high savings ratio—the right hon. Gentleman perfectly fairly quoted that—is going into Government stock and far too little is going into the growth sector of industry. That means the generation and birth rate of small businesses. That is the answer to the Chief Secretary.
10.30 p.m.
It is not that we have too few savings. The savings ratio is high. I do not go along with the idea that there is an investment strike. But a distortion is built into the investment income surcharge against investment in industry. I believe that industrial strategy requires that we move towards the abolition—not just changing the thresholds—of the investment income surcharge over three years.
The Chief Secretary will say that it is very expensive and that the Liberals are going to give away another £100 million. But he knows that he has been virtually guaranteed, in so far as it is within the power of anyone in the Committee to guarantee anything, the votes of the Liberal Party for the introduction of a wealth tax. The Liberal Party has not stopped the Government from introducing a wealth tax. I have begged the right hon. Gentleman on bended knee to introduce a wealth tax—[HON. MEMBERS: "Oh."]—as a substitute for the investment income surcharge and the top rates of income tax above 50 per cent. If the Government had introduced a wealth tax as a quid pro quo for those two things—the abolition of investment income surcharge and of all rates of income tax above 50 per cent. on earned income—we would have a much more sensible income tax system than we have today.
Unfortunately, the right hon. Gentleman will now hope to get a majority to introduce some ghastly abortion of a

wealth tax dreamt up by the Labour Party executive committee. It will be a horror. It will be imposed on top of all other forms of income tax and so on. It will destroy all the entrepreneurial flair which still exists in British industry. I beg the right hon. Gentleman again to consider that this is the right way to proceed. Even now it is not too late to introduce a wealth tax. There is time between now and July or October or whenever it is. It would be a far better thing to do. The Chief Secretary should not come at me about the amendment costing the Government another £100 million. We shall replace every penny of this investment income surcharge revenue with a wealth tax, and we shall be better off for it.

Mr. Higgins: I am glad to have the opportunity of supporting the amendment moved by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). It would have the effect of raising the figure at which investment income surcharge becomes effective from £1,700 to £2,000 for those under 65 and from £2,500 to £3,000 for those over 65.
I am particularly anxious to support the amendment because it is a matter of great concern to my constituents, especially those over 65. The only point that worried me in my hon. and learned Friend's remarks was his reference to Mr. Hugh Scanlon. I discovered earlier today, somewhat to my surprise, that in Worthing town hall Mr. Scanlon and his members were having a discussion in one room while I and members of the Worthing Conservative Association were having a discussion in another room. It was perhaps a shame that some of my members did not have the opportunity of speaking to Mr. Scanlon and his colleagues and stressing how much those who are retired and living on fixed incomes have suffered from inflation and the taxation policies of the Government. I do not believe that if they had had such an opportunity they would have found so unsympathetic a response as we have had from the Chief Secretary this evening.
The right hon. Gentleman's argument was so weak that he concentrated largely on the principle of whether there should be an investment income surcharge. I should be happy to debate that matter with him at great length if he cared to persuade the Leader of the House to


provide time to do so. But that is not what we are debating this evening. The fact that the Chief Secretary, with his customary skill, found it necessary to produce a red herring of that kind showed how weak his argument was.
Looking at the recent history of the matter, one sees that the fact is that one of the Government's first actions was to lower the rate at which investment income surcharge became payable, particularly for pensioners, thereby making it a much harsher tax and far less favourable to those living on investment income than the proposals that were put forward, as the Chief Secretary said, by the present Lord Barber in his 1972 Budget. When I intervened, the Chief Secretary suggested that what is now proposed by the Government is as equitable as they can make it.
The truth is that even what is proposed in the Finance Bill is significantly harsher than the harsh measures that the Chancellor himself introduced in his first Budget when he came into office. In real terms, he would have to raise the limit, as my hon. and learned Friend suggested, to about £4,400, and still that would put these people back only to the position they were in in 1972.
The question has been asked: what has changed since then? Of course, those living on fixed incomes and those paying investment income surcharge have experienced an appalling rate of inflation, which has probably affected their real incomes more than it has affected the incomes of any other group in the country. The problem for them is that, although the national insurance pension may be raised perhaps faster than the rate of inflation, their overall income, including the investment income which they derive from their savings, has declined.
There are very few ways in which any Government can help people in this group. It is a difficult thing to do. But one of the few ways in which it can be done is the way in which the previous Conservative Government did it, that is, by making a concession—that is not really the right word—by making an allowance which will give some relief to pensioners, in particular, on their investment income. Even if the figure were raised to £4,400, it would still be inadequate to prevent the fall in their real incomes, but it would do something to help them.
But the Chief Secretary is not even prepared to go that far. He is prepared only to make a very moderate concession, which is quite inadequate to compensate for the ravages which have been wrought on those on fixed incomes by the present Government. In this case "ravages" is the right word, because the effect has been traumatic. People who retired perhaps 10, 15 or 20 years ago, believing that their savings would keep them in a reasonable standard of life for the rest of their time, have been appallingly penalised by this Government. I therefore support these amendments.
The Chief Secretary made no attempt whatever to justify the harshness of what he is proposing and the inadequacy of the change that he is putting before the Committee. He specified the figures in terms of £5 million in a part year and £30 million, I understand, in a full year. But to suppose that those figures would have the slightest significance in terms of economic management, in terms of what the effect would be, for example, on Table 5 in the Red Book, is utter rubbish. It is pure prejudice which leads the right hon. Gentleman and his hon. Friends to refuse to give an adequate allowance, or some small allowance, to compensate for some of the effects of inflation.
I hope that we shall carry this amendment as we carried the earlier one. It is beyond my comprehension that anyone who has said that he is in opposition to the present Government would not support it. But, taking all the measures which have been carried by the Committee so far, I hope we shall not merely say that it is up to the Government to suggest what should be done to offset the changes. It is for the House of Commons, having carried the amendments, to choose among the various courses open to us. Certainly, it would be wrong to seek to do so by increasing employers' national insurance contributions.
My firm view is that the right course is to raise the standard rate of value added tax to 10 per cent. If we do that, no charge of irresponsibility can be levelled against us by the Government in these debates.
I wish to approach the matter now from the precise record of what the Chief Secretary said in the Budget debate. It is extraordinary to discover that, weeks later, the right hon. Gentleman's speech


has still not been printed in the Official Report. The right hon. Gentleman suggested that we on this side were in some sense suffering from schizophrenia. I suggested that the Government themselves were very much suffering from schizophrenia, because what they were doing was cutting taxes at the same time as they were putting up interest rates.
The Chief Secretary was inclined to pooh-pooh that idea. Since then, however, the Government have had a further massive increase in interest rates. The reality is that they are seeking to finance their tax cuts by borrowing and they have had to put up interest rates. It is high time that we had a clearer estimate from the Government—in the light of the amendments which have been carried—of how much of the borrowing requirement they expect to borrow from the non-bank public.
The passing of these amendments would do something to encourage savings and to suggest to people that in the longer term savings will yield a return which at least does something to compensate for postponement of consumption. In that context, it is important to define saving in that way. It is a postponement of consumption.
The amendment should be carried because it would go a little way to compensate for the effect which Government measures have had on those on fixed incomes. It would do something to help those who have saved and who must go on saving if our economy is to be put on a sound footing. I support the amendment, which I hope will be pressed to a Division.

Mr. Powell: The hon. Member for Cornwall, North (Mr. Pardoe) referred, as others have done, to my almost celebrated laudation of income tax as a tax—laudation which was based, among other things, upon the contention that it is inherently more neutral than most other forms of tax. I did not, of course, mean that income tax as at present levied in all its aspects is neutral, and certainly the Committee has before it one of the distortions in the levying of income tax which, if ever it was justified, has in my opinion ceased to be justified.
The Chief Secretary was unreasonable in making it the chief basis of his reply

to the hon. and learned Member for Dover and Deal (Mr. Rees) that the Opposition showed a strong disposition to resile from the position taken up in the revision of income tax in 1972 and to move towards the view that the distinction between earned and unearned income for purposes of tax was no longer justified.
I believe that there are cycles through which some form of taxation enjoys first an irrational popularity and then afterwards, and only gradually, we come to perceive that the supposed arguments are unsound. If that process is of a gradual and hesitating character, and if it is going in the right direction, it can be supported. My right hon. and hon. Friends will certainly support the amendment before the Committee on that ground. But it would be much easier, logically, to argue for the entire abolition of the distinction between the two forms of income than for alteration in the thresholds or modalities with which that distinction is made.
The reasons which were given at the inception of the distinction—admittedly in the reverse way by a preference for earned income in 1907—and which were examined by the Royal Commission on the Taxation of Profits and Income some 40 years or more later were probably never seriously meant. My guess is that the Chancellor of the Exchequer in 1907 wanted to make a remission of income tax in what he judged in the political circumstances of the time to be the most popular form and that he thought up a rationale to fit what he was in in any case intending to do. If the rationale would bear examination in the circumstances of 1907, it certainly does not bear examination in the circumstances of 1978.
10.45 p.m.
The basic argument advanced is that there are hidden costs and uncertainties attached to earned income which do not attach to unearned or investment income. I doubt whether that was ever valid. The argument originally was that a person dependent upon earned income had nevertheless to take measures to protect himself against loss of that income through sickness, unemployment, retirement and other eventualities. But presumably, if he was to charge his income in order to protect himself against those eventualities, he must have done so by savings. He must have done so with the intention of


living upon the yield of his savings. Therefore, it was inherently contradictory to make an allowance for earned income and then tax the produce of the savings which were supposed to be one of the grounds for making that allowance in favour of earned income.
I would not have thought that it was seriously considered to be possible in the circumstances of the late 1970s to pretend that less uncertainty attaches today to the sources of investment income than to the sources of earned income, as earned income is now classified and defined, including, of course, many forms of pension, which are much more secure than income derived from investments. It is simply not true that an investment can be left to produce an assured income year after year. Quite apart from inflation, investments have to be looked after and turned over and changed in relation to the economic changes. A considerable responsibility attaches to those who have the duty of maintaining a given income from investment. Therefore work, responsibility and uncertainty attach to the income derived from investment, quite apart from inflation.
The fact of inflation, however, on the scale we have known it, which would have seemed unimaginable and crazy before the First World War, has made nonsense of the claim that investment income has some peculiar degree of security. Inflation has hit different forms of investment arbitrarily and differentially, and it has removed any foundation which could exist for treating investment income as such as superior to other forms of income in its security.
Therefore, I believe that we are moving—I would sense, with the acquiescence of both sides of the Committee—towards abolishing what has now become an obsolete distinction between two forms of income. As a move in that direction, my right hon. and learned Friends and I welcome the amendment.

Mr. Giles Shaw: I wish particularly to support the amendment concerned with the elderly retired. A Mr. A. V. Duncan is running a campaign in my constituency. He has written to practically all those on the Treasury Bench and most members of those on my own Front Bench in support of the campaign for the elderly retired. His point

is that when we talk about income surcharge on the retired we are talking of a group so many of whom are in the 80-plus age group. Mr. Duncan is in his eightieth year.
These persons had no alternative but to save and invest for their retirement. The group is decreasing in number. It can hardly come outside the competence of the Government, given that the Chief Secretary has spoken of equity in this matter. I ask him to remember the 80-plus age group when he replies to the debate.

Mr. Peter Rees: We have had a short but important debate. In the course of it, particularly from the Opposition side, there has been a careful examination of some of the fundamental questions which are posed by our tax system.
I found myself in some sympathy with the approach of the right hon. Member for Down, South (Mr. Powell), who said that, logically, we are being driven away from an investment income surcharge and from the distinction between earned and unearned income. The difficulty is that it is hard to detect much logic in our existing system of direct taxation. That is why we have put down amendments which are not of quite so fundamental a nature. How far we can take them on another occasion remains to be seen.
The hon. Member for Cornwall, North (Mr. Pardoe) has looked beyond Mr. Asquith, who bears responsibility for the introduction of earned income relief, to Mr. Gladstone, whose views in 1853 deserve reading and rereading. I commend them in particular to the Chief Secretary, who might be disposed to follow his example, particularly in the care of the candle ends of public expenditure.
The Chief Secretary flinched from all the serious points put to him from this side of the Committee and asked a little plaintively—and uncharacteristically, because he is normally more buoyant in his arguments, but perhaps he was sobered by the happenings of today and Monday—what had changed since Lord Barber introduced the investment income surcharge. A number of my hon. Friends have pointed out that it was only a reversal of the earned income relief and that it was not, perhaps, such a novel concept.
Alas, a great variety of things have changed since 1973–74. Even after the glorious events of Monday, we are dealing with a basic rate of 33 per cent. We are not dealing with the same higher rates as those introduced by the noble Lord. We have had to endure the introduction of capital transfer tax and the Chief Secretary and his right hon. Friends have presided over unprecedented inflation. This has entirely transformed the fiscal scene.
My hon. Friends the Members for Pudsey (Mr. Shaw), Worthing (Mr. Higgins) and Somerset, North (Mr. Dean) have drawn attention to categories of taxpayer who are suffering acutely from the tax regime in general and the rates of investment income surcharge in particular.
The Chief Secretary did not condescend to deal with any of the anomalies, because they defeat even his oratorical ingenuity. The substance of his argument was that he and right hon. Friends had been sufficiently generous and that a cost of £30 million was more than he could support.
A cost of £30 million when the yield of income tax—at least, before Monday—is likely to be £19 billion this year does not strike me as a convincing, profound

or cogent argument. The Chief Secretary has shown himself, uncharacteristically perhaps, to be niggardly and ungenerous.

The philosophy underlying the tax system as the right hon. Gentleman and his right hon. Friends, though perhaps not his hon. Friends below the Gangway, see it is that it is all right, as the Chancellor of the Duchy of Lancaster reminded us, for those with £10 million because they can afford to dispense with their income. The rest of us are of no concern to the Treasury Front Bench.

Mr. Dennis Canavan: Hear, hear.

Mr. Rees: The hon. Member for West Stirlingshire (Mr. Canavan) remained silent during this debate, but I have no doubt that there will be other occasions when we can hear his special contributions. He has confirmed our suspicions.
Those are sentiments with which we can have no truck. We find the Government to be cold and repellent. I invite my right hon. and hon. Friends to support the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 275, Noes 289.

Division No. 203]
AYES
[10.54 p.m.


Adley Robert
Carson, John
Fookes, Miss Janet


Aitken, Jonathan
Chalker, Mrs Lynda
Forman, Nigel


Alison, Michael
Channon, Paul
Fowler, Norman (Sutton C'f'd)


Arnold, Tom
Churchill, W. S.
Fox, Marcus


Atkins, Rt Hon H. (Spelthorne)
Clark, Alan (Plymouth, Sutton)
Fraser, Rt Hon H. (Stafford &amp; St)


Atkinson, David (Bournemouth, East)
Clark, William (Croydon S)
Freud, Clement


Awdry, Daniel
Clarke, Kenneth (Rushcliffe)
Fry, Peter


Baker, Kenneth
Clegg, Walter
Galbraith, Hon T.G. D.


Banks, Robert
Cockcroft, John
Gardiner, George (Reigate)


Beith, A. J.
Cooke, Robert (Bristol W)
Gardner, Edward (S Fylde)


Bell, Ronald
Cope, John
Gilmour, Rt Hon Ian (Chesham)


Bendall, Vivian (Ilford North)
Cormack, Patrick
Gilmour, Sir John (East Fife)


Bennett, Sir Frederic (Torbay)
Costain, A. P.
Glyn, Dr Alan


Benyon, W.
Craig, Rt Hon W. (Belfast E)
Godber, Rt Hon Joseph


Berry, Hon Anthony
Critchley, Julian
Goodhart, Philip


Biffen, John
Crouch, David
Goodlad, Alastair


Biggs-Davidson, John
Crowder F. P.
Gorst, John


Blaker, Peter
Davies, Rt Hon J. (Knutsford)
Gower, Sir Raymond (Barry)


Body, Richard
Dean, Paul (N Somerset)
Grant, Anthony (Harrow C)


Boscawen, Hon Robert
Dodsworth, Geoffrey
Gray, Hamish


Bottomley, Peter
Douglas-Hamilton, Lord James
Griffiths, Eldon


Bowden, A. (Brighton, Kemptown)
Drayson, Burnaby
Grist, Ian


Boyson, Dr Rhodes (Brent)
du Cann, Rt Hon Edward
Grylls, Michael


Bradford, Rev Robert
Dunlop, John
Hall-Davis, A. G. F.


Braine, Sir Bernard
Durant, Tony
Hamilton, Archibald (Epsom &amp; Ewell)


Brittan, Leon
Dykes, Hugh
Hamilton, Michael (Salisbury)


Brocklebank-Fowler, C.
Eden, Rt Hon Sir John
Hampson, Dr Keith


Brooke, Peter
Edwards, Nicholas (Pembroke)
Hannam, John


Brotherton, Michael
Elliott, Sir William
Harrison, Col Sir Harwood (Eye)


Bryan, Sir Paul
Emery, Peter
Harvie Anderson, Rt Hon Miss


Buchanan-Smith, Alick
Eyre, Reginald
Haselhurst, Alan


Buck, Antony
Fairbairn, Nicholas
Hastings, Stephen


Budgen, Nick
Farr, John
Hayers, Rt Hon Sir Michael


Bulmer, Esmond
Fell, Anthony
Hawkins, Paul


Burden, F. A.
Finsberg, Geoffrey
Hayhoe, Barney


Butler, Adam (Bosworth)
Fisher, Sir Nigel
Heseltine, Michael




Hicks, Robert
Mayhew, Patrick
St. John-Stevas, Norman


Higgins, Terence L.
Meyer, Sir Anthony
Scott, Nicholas


Hodgson, Robin
Miller, Hal (Bromsgrove)
Shaw, Giles (Pudsey)


Holland, Philip
Mills, Peter
Shelton, William (Streatham)


Hooson, Emlyn
Miscampbell, Norman
Shepherd, Colin


Hordern, Peter
Mitchell, David (Basingstoke)
Shersby, Michael


Howe, Rt Hon Sir Geoffrey
Moate, Roger
Silvester, Fred


Howell, David (Guildford)
Molyneaux, James
Sims, Roger


Howells, Geraint (Cardigan)
Monro, Hector
Sinclair, Sir George


Hunt, David (Wirral)
Montgomery, Fergus
Skeet, T. H. H.


Hunt, John (Ravensbourne)
Moore, John (Croydon C)
Smith, Cyril (Rochdale)


Hurd, Douglas
More, Jasper (Ludlow)
Smith, Dudley (Warwick)


Hutchison, Michael Clark
Morgan, Geraint
Smith, Timothy John (Ashfield)


Irving, Charles (Cheltenham)
Morris, Michael (Northampton S)
Speed, Keith


James, David
Morrison, Charles (Devizes)
Spence, John


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Morrison, Hon Peter (Chester)
Spicer, Michael (S Worcester)


Jessel, Toby
Mudd, David
Sproat, Iain


Johnson Smith, G. (E Grinstead)
Neave, Airey
Stainton, Keith


Johnston, Russell (Inverness)
Neubert, Michael
Stanbrook, Ivor


Jones, Arthur (Daventry)
Newton, Tony
Stanley, John


Jopling, Michael
Nott, John
Steel, Rt Hon David


Joseph, Rt Hon Sir Keith
Onslow, Cranley
Steen, Anthony (Wavertree)


Kaberry, Sir Donald
Oppenheim, Mrs Sally
Stewart, Ian (Hitchin)


Kershaw, Anthony
Page, John (Harrow West)
Stokes, John


Kimball, Marcus
Page, Rt Hon R. Graham (Crosby)
Stradling Thomas, J.


King, Evelyn (South Dorset)
Page, Richard (Workington)
Tapsell, Peter


King, Tom (Bridgwater)
Paisley, Rev Ian
Taylor, R. (Croydon NW)


Kitson, Sir Timothy
Pardoe, John
Tebbit, Norman


Knight, Mrs Jill
Parkinson, Cecil
Temple-Morris, Peter


Knox, David
Pattie, Geoffrey
Thatcher, Rt Hon Margaret


Lamont, Norman
Penhaligon, David
Thomas, Rt Hon P. (Hendon S)


Langford-Holt, Sir John
Percival, Ian
Thorpe, Rt Hon Jeremy (N Devon)


Latham, Michael (Melton)
Peyton, Rt Hon John
Townsend, Cyril D.


Lawrence, Ivan
Pink, R. Bonner
Trotter, Neville


Lawson, Nigel
Powell, Rt Hon J. Enoch
van Straubenzee, W. R.


Lester, Jim (Beeston)
Prentice, Rt Hon Reg
Vaughan, Dr Gerald


Lewis, Kenneth (Rutland)
Price, David (Eastleigh)
Viggers, Peter


Loveridge, John
Prior, Rt Hon James
Wainwright, Richard (Colne V)


Luce, Richard
Pym, Rt Hon Francis
Wakeham, John


McAdden, Sir Stephen
Raison, Timothy
Walder, David (Clitheroe)


McCrindle, Robert
Rathbone, Tim
Walker, Rt Hon P. (Worcester)


McCusker, H.
Rees, Peter (Dover &amp; Deal)
Wall, Patrick


Macfarlane, Neil
Rees-Davies, W. R.
Walters, Dennis


MacGregor, John
Renton, Rt Hon Sir D. (Hunts)
Warren, Kenneth


MacKay, Andrew (Stechford)
Renton, Tim (Mid-Sussex)
Weatherill, Bernard


Macmillan, Rt Hon M. (Farnham)
Rhodes, James R.
Wells, John


McNair-Wilson, M. (Newbury)
Ridley, Hon Nicholas
Whitelaw, Rt Hon William


McNair-Wilson, P. (New Forest)
Ridsdale, Julian
Whitney, Raymond (Wycombe)


Madel, David
Rifkind, Malcolm
Wiggin, Jerry


Marshall, Michael (Arundel)
Rippon, Rt Hon Geoffrey
Winterton, Nicholas


Marten, Neil
Roberts, Wyn (Conway)
Wood, Rt Hon Richard


Mates, Michael
Rodgers, Sir John (Sevenoaks)
Young, Sir G. (Ealing, Acton)


Mather, Carol
Ross, Stephen (Isle of Wight)
Younger, Hon George


Maude, Angus
Ross, William (Londonderry)



Maudling, Rt Hon Reginald
Rossi, Hugh (Hornsey)
TELLERS FOR THE AYES:


Mawby, Ray
Royle, Sir Anthony
Mr. Spencer Le Marchant and


Maxwell-Hyslop, Robin
Sainsbury, Tim
Mr. Michael Roberts.




NOES


Abse, Leo
Brown, Hugh D. (Provan)
Crawshaw, Richard


Allaun, Frank
Brown, Robert C. (Newcastle W)
Crowther, Stan (Rotherham)


Anderson, Donald
Buchan, Norman
Cryel, Bob


Archer, Rt Hon Peter
Buchanan, Richard
Cunningham, Dr J. (Whiteh)


Armstrong, Ernest
Callaghan, Rt Hon J. (Cardiff SE)
Davidson, Arthur


Ashley, Jack
Callaghan, Jim (Middleton &amp; P)
Davies, Bryan (Enfield N)


Ashton, Joe
Campbell, Ian
Davies, Rt Hon Denzil


Atkins, Ronald (Preston N)
Canavan, Dennis
Davies, Ifor (Gower)


Atkinson, Norman
Cant, R. B.
Davis, Clinton (Hackney C)


Bain, Mrs Margaret
Carmichael, Neil
Deakins, Eric


Barnett, Guy (Greenwich)
Carter, Ray
Dean, Joseph (Leeds West)


Barnett, Rt Hon Joel (Heywood)
Carter-Jones, Lewis
Dell, Rt Hon Edmund


Bates, Alf
Cartwright, John
Dempsey, James


Bean, R. E.
Castle, Rt Hon Barbara
Dewar, Donald


Benn, Rt Hon Anthony Wedgwood
Clemitson, Ivor
Doig, Peter


Bennett, Andrew (Stockport N)
Cocks, Rt Hon Michael (Bristol S)
Dormand, J. D.


Bidwell, Sydney
Cohen, Stanley
Douglas-Mann, Bruce


Bishop, Rt Hon Edward
Coleman, Donald
Duffy, A. E. P.


Blenkinsop, Arthur
Colquhoun, Ms Maureen
Dunn, James A.


Boardman, H.
Concannon, Rt Hon John
Dunnett, Jack


Booth, Rt Hon Albert
Conlan, Bernard
Eadie, Alex


Boothroyd, Miss Betty
Cook, Robin F. (Edin C)
Edge, Geoff


Bottomley, Rt Hon Arthur
Corbett, Robin
Ellis, John (Brigg &amp; Scun)


Boyden, James (Bish Auck)
Cox, Thomas (Tooting)
English, Michael


Bradley, Tom
Craigen, Jim (Maryhill)
Ennals, Rt Hon David


Bray, Dr Jeremy
Crawford, Douglas
Evans, Fred (Caerphilly)







Evans, Gwynfor (Carmarthen)
Lomas, Kenneth
Sandelson, Neville


Evans, Ioan (Aberdare)
Loyden, Eddie
Sedgemore, Brian


Evans, John (Newton)
Luard, Evan
Selby, Harry


Ewing, Harry (Stirling)
Lyon, Alexander (York)
Sever, John


Faulds, Andrew
Lyons, Edward (Bradford W)
Shaw, Arnold (Ilford South)


Fernyhough, Rt Hon E.
McCartney, Hugh
Sheldon, Rt Hon Robert


Fitt, Gerard (Belfast W)
MacCormick, Iain
Shore, Rt Hon Peter


Flannery, Martin
McDonald, Dr Oonagh
Short, Mrs Renée (Wolv NE)


Fletcher, Ted (Darlington)
McElhone, Frank
Silkin, Rt Hon S. C. (Dulwich)


Foot, Rt Hon Michael
McGuire, Michael (Ince)
Sillars, James


Ford, Ben
MacKenzie, Rt Hon Gregor
Silverman, Julius


Forrester, John
Maclennan, Robert
Skinner, Dennis


Fowler, Gerald (The wrekin)
McMillan, Tom (Glasgow C)
Smith, John (N Lanarkshire)


Fraser, John (Lambeth, N'w'd)
McNamara, Kevin
Snape, Peter


Freeson, Rt Hon Reginald
Madden, Max
Spearing, Nigel


Garrett, John (Norwich S)
Magee, Bryan
Spriggs, Leslie


Garrett, W. E. (Wallsend)
Mahon, Simon
Stallard, A. W.


George, Bruce
Mallalieu, J. P. W.
Stewart, Rt Hon Donald


Gilbert, Rt Hon Dr John
Marks, Kenneth
Stewart, Rt Hon M. (Fulham)


Ginsburg, David
Marshall, Dr Edmund (Goole)
Stoddart, David


Goldlng, John
Marshall, Jim (Leicester S)
Stott, Roger


Gould, Bryan
Mason, Rt Hon Roy
Strauss, Rt Hon G. R.


Gourlay, Harry
Meacher, Michael
Summerskill, Hon Dr Shirley


Graham, Ted
Mellish, Rt Hon Robert
Swain, Thomas


Grant, John (Islington C)
Mendelson, John
Taylor, Mrs Ann (Bolton W)


Grocott, Bruce
Mikardo, Ian
Thomas, Dafydd (Merioneth)


Hamilton, W. W. (Central Fife)
Millan, Rt Hon Bruce
Thomas, Jeffrey (Abertillery)


Hardy, Peter
Miller, Dr M. S. (E Kilbride)
Thomas, Mike (Newcastle E)


Harrison, Rt Hon Walter
Mitchell, Austin
Thomas, Ron (Bristol NW)


Hart, Rt Hon Judith
Molloy, William
Thompson, George


Hattersley, Rt Hon Roy
Moonman, Eric
Thorne, Stan (Preston S)


Hayman, Mrs Helene
Morris, Alfred (Wythenshawe)
Tierney, Sydney


Healey, Rt Hon Denis
Morris, Rt Hon Charles R.
Tilley, John (Lambeth, Central)


Heffer, Eric S.
Morris, Rt Hon J. (Aberavon)
Tinn, James


Henderson, Douglas
Moyle, Roland
Tomlinson, John


Hooley, Frank
Mulley, Rt Hon Frederick
Tomney, Frank


Horam, John
Murray, Rt Hon Ronald King
Torney, Tom


Howell, Rt Hon Denis (B'ham, Sm H)
Newens, Stanley
Tuck, Raphael


Hoyle, Doug (Nelson)
Noble, Mike
Urwin, T. W.


Huckfield, Les
Oakes, Gordon
Varley, Rt Hon Eric G.


Hughes, Rt Hon C. (Anglesey)
Ogden, Eric
Wainwright, Edwin (Dearne V)


Hughes, Robert (Aberdeen N)
O'Halloran, Michael
Walker, Harold (Doncaster)


Hughes, Roy (Newport)
Orbach, Maurice
Walker, Terry (Kingswood)


Hunter, Adam
Orme, Rt Hon Stanley
Ward, Michael


Irvine, Rt Hon Sir A. (Edge Hill)
Ovenden, John
Watkins, David


Irving, Rt Hon S. (Dartford)
Owen, Rt Hon Dr David
Watkinson, John


Jackson, Colin (Brighouse)
Padley, Walter
Watt, Hamish


Jackson, Miss Margaret (Lincoln)
Park, George
Weitzman, David


Janner, Greville
Parker, John
Wellbeloved, James


Jay, Rt Hon Douglas
Parry, Robert
Welsh, Andrew


Jeger, Mrs Lena
Pavitt, Laurie
White, Frank R. (Bury)


Jenkins, Hugh (Putney)
Pendry, Tom
White, James (Pollok)


John, Brynmor
Perry, Ernest
Whitehead, Philip


Johnson, James (Hull West)
Phipps, Dr Colin
Whitlock, William


Jones, Alec (Rhondda)
Price, C. (Lewisham W)
Wigley, Dafydd


Jones, Barry (East Flint)
Price, William (Rugby)
Willey, Rt Hon Frederick


Jones, Dan (Burnley)
Radice, Giles
Williams, Rt Hon Alan (Swansea W)


Judd, Frank
Rees, Rt Hon Merlyn (Leeds S)
Williams, Alan Lee (Hornch'ch)


Kaufman, Gerald
Reid, George
Williams, Rt Hon Shirley (Hertford)


Kerr, Russell
Richardson, Miss Jo
Wilson, Gordon (Dundee E)


Kilroy-Silk, Robert
Roberts, Albert (Normanton)
Wilson, Rt Hon Sir Harold (Huyton)


Kinnock, Neil
Roberts, Gwilym (Cannock)
Wilson, William (Coventry SE)


Lambie, David
Robinson, Geoffrey
Wise, Mrs Audrey


Lamborn, Harry
Roderick, Caerwyn
Woodall, Alec


Lamond, James
Rodgers, George (Chorley)
Woof, Robert


Latham, Arthur (Paddington)
Rodgers, Rt Hon William (Stockton)
Wrigglesworth, Ian


Lee, John
Rooker, J. W.
Young, David (Bolton E)


Lestor, Miss Joan (Eton &amp; Slough)
Roper, John



Lever, Rt Hon Harold
Rose, Paul B.
TELLERS FOR THE NOES:


Lewis, Arthur (Newham N)
Ross, Rt Hon W. (Kilmarnock)
Mr. Joseph Harper and


Lewis, Ron (Carlisle)
Rowlands, Ted
Mr. James Hamilton.


Litterick, Tom
Ryman, John

Question accordingly negatived.

Mr. Pardoe: I beg to move Amendment No. 13, in page 10, line 23, after 'who', insert 'either'.

The First Deputy Chairman (Sir Myer Galpern): With this amendment we are to take Amendment No. 16, in page 10, line 25, after 'more', insert

'or who proves that at any time in the year of assessment—

(a) that he has living with him a child of his with respect to whom the conditions set out in section 10(2) of the Taxes Act 1970 have been fulfilled, or
(b) has custody of and maintains at his own expense a child (other than a child of his) provided that the said conditions have been fulfilled, and


(c) is a person coming within the definition set out in subsection (1) of section 14 of the Taxes Act 1970'.

Mr. Pardoe: Everyone in the Committee accepts that there is a difference in the threshold at which we pay investment income surcharge according to whether we are over or under retirement age. The Bill provides that those under retirement age start paying the surcharge above an investment income of £1,700 while those over retirement age start paying it at an investment income of £2,500.
The whole point of the amendment is that there are other groups in society, apart from those over retirement age, who are equally entitled to this kind of distinction. The amendment refers to single-parent families, who have many of the same sort of disadvantages as the retired. [Interruption.]

The First Deputy Chairman: Order. There is far too much conversation going on in the Chamber. I am having great difficulty in hearing the hon. Gentleman.

Mr. Pardoe: Single-parent families might well be said to have disadvantages over and above those suffered by people over retirement age. In particular, such parents cannot necessarily work full-time and, therefore, may have to rely to a greater extent on income from savings. They may incur additional expenses in having a child looked after while they are working. Normally the husband would have the assistance of a wife, and vice versa, in looking after a child or children.
The amendment simply seeks to apply the retirement threshold for investment income to single-parent families. I hope that the Government will be prepared to accept the argument for that.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The amendment provides that those with a higher tax threshold because they are over 65 will find that the same provisions apply to those eligible for the additional personal

allowance. The amendment is designed to assist single-parent families. But it is a rather surprising amendment that seeks to produce, in an investment income surcharge that has certain specially advantageous rates only for the elderly, an extension to those who qualify for the additional personal allowance.

The Government have implemented the Finer Report, which produced the proper way to handle these problems. That means giving the additional personal allowance, and this year we have increased it to £550 a year. This is clearly a much better way of helping those with single-parent responsibilities.

If we were to accept the amendment, it would mean that we would help the minority of single parents who have investment income. Those with investment income based on a capital of about £20,000 at present have relief from the surcharge. Those with a capital of less than £20,000 pay no investment income surcharge. I find it an odd provision to assist those single-parent families with rather more than £20,000. These are considerable sums of capital, and considerable sums of unearned income arise from them.

If the amendment were accepted, it would do nothing for single parents who rely on their earnings to support their children and nothing for those who, because of their family responsibility, have to rely on their pensions. The proper way to help such people is through the additional personal allowance, giving them special reliefs for taxation on earned income; and for those who are not able to earn their living, because of their responsibilities, to give further assistance by way of pensions. This is how the Government have proceeded to provide help, and this is how I believe help should continue to be provided.

Question put, That the amendment be made:—

The Committee divided: Ayes 101, Noes 277.

Division No. 204]
AYES
[11.15 p.m.


Adley Robert
Bell, Ronald
Clark, William (Croydon S)


Aitken, Jonathan
Bottomley, Peter
Clarke, Kenneth (Rushcliffe)


Amery, Rt Hon Julian
Braine, Sir Bernard
Cormack, Patrick


Arnold, Tom
Brotherton, Michael
Crawford, Douglas


Awdry, Daniel
Burden, F. A.
Dodsworth, Geoffrey


Bain, Mrs Margaret
Canavan, Dennis
du Cann, Rt Hon Edward


Banks, Robert
Channon, Paul
Dunlop, John


Beith, A. J.
Clark, Alan (Plymouth, Sutton)
Durant, Tony




Eden, Rt Hon Sir John
Lawrence, Ivan
Scott, Nicholas


Evans, Gwynfor (Carmarthen)
Lewis, Kenneth (Rutland)
Shaw, Giles (Pudsey)


Fell, Anthony
Loveridge, John
Shelton, William (Streatham)


Fookes, Miss Janet
MacCormick, Iain
Shersby, Michael


Fox, Marcus
McCrindle, Robert
Sims, Roger


Fraser, Rt Hon H. (Stafford &amp; St)
Macfarlane, Neil
Skeet, T. H. H.


Freud, Clement
McNair-Wilson, M. (Newbury)
Smith, Dudley (Warwick)


Galbraith, Hon T.G. D.
Maudling, Rt Hon Reginald
Speed, Keith


Glyn, Dr Alan
Maxwell-Hyslop, Robin
Steel, Rt Hon David


Goodhart, Philip
Miller, Hal (Bromsgrove)
Steen, Anthony (Wavertree)


Goodlad, Alastair
Miscampbell, Norman
Stewart, Rt Hon Donald


Gower, Sir Raymond (Barry)
Mitchell, David (Basingstoke)
Thomas, Dafydd (Merioneth)


Gray, Hamish
Morris, Michael (Northampton S)
Thompson, George


Harvie Anderson, Rt Hon Miss
Morrison, Charles (Devizes)
Thorpe, Rt Hon Jeremy (N Devon)


Haselhurst, Alan
Mudd, David
Townsend, Cyril D.


Henderson, Douglas
Onslow, Cranley
Wainwright, Richard (Colne V)


Hodgson, Robin
Page, John (Harrow West)
Walters, Dennis


Holland, Philip
Penhaligon, David
Warren, Kenneth


Hooson, Emlyn
Price, David (Eastleigh)
Watt, Hamish


Howells, Geraint (Cardigan)
Reid, George
Welsh, Andrew


Hunt, John (Ravensbourne)
Renton, Rt Hon Sir D. (Hunts)
Wigley, Dafydd


Irving, Charles (Cheltenham)
Renton, Tim (Mid-Sussex)
Wilson, Gordon (Dundee E)


James, David
Roberts, Wyn (Conway)
Winterton, Nicholas


Johnston, Russell (Inverness)
Ross, Stephen (Isle of Wight)



Jones, Arthur (Daventry)
Rossi, Hugh (Hornsey)
TELLERS FOR THE AYES:


Kimball, Marcus
Royle, Sir Anthony
Mr. John Pardoe and


King, Evelyn (South Dorset)
St. John-Stevas, Norman
Mr. Cyril Smith.




NOES


Abse, Leo
Davies, Denzil (Llanelli)
Horam, John


Allaun, Frank
Davies, Ifor (Gower)
Howell, Rt Hon Denis (B'ham, Sm H)


Anderson, Donald
Davis, Clinton (Hackney C)
Hoyle, Doug (Nelson)


Archer, Rt Hon Peter
Deakins, Eric
Huckfield, Les


Armstrong, Ernest
Dean, Joseph (Leeds West)
Hughes, Rt Hon C. (Anglesey)


Ashley, Jack
Dell, Rt Hon Edmund
Hughes, Robert (Aberdeen N)


Ashton, Joe
Dempsey, James
Hughes, Roy (Newport)


Atkins, Ronald (Preston N)
Dewar, Donald
Hunter, Adam


Atkinson, Norman
Doig, Peter
Irving, Rt Hon S. (Dartford)


Bagier, Gordon A. T.
Dormand, J. D.
Jackson, Colin (Brighouse)


Barnett, Guy (Greenwich)
Douglas-Mann, Bruce
Jackson, Miss Margaret (Lincoln)


Barnett, Rt Hon Joel (Heywood)
Duffy, A. E. P.
Janner, Greville


Bates, Alf
Dunn, James A.
Jay, Rt Hon Douglas


Bean, R. E.
Dunnett, Jack
Jeger, Mrs Lena


Benn, Rt Hon Anthony Wedgwood
Eadie, Alx
Jenkins, Hugh (Putney)


Bennett, Andrew (Stockport N)
Edge, Geoff
John, Brynmor


Bidwell, Sydney
Ellis, John (Brigg &amp; Scun)
Johnson, James (Hull West)


Bishop, Rt Hon Edward
English, Michael
Jones, Alec (Rhondda)


Blenkinsop, Arthur
Ennals, Rt Hon David
Jones, Barry (East Flint)


Boardman, H.
Evans, Fred (Caerphilly)
Jones, Dan (Burnley)


Booth, Rt Hon Albert
Evans, Ioan (Aberdare)
Judd, Frank


Boothroyd, Miss Betty
Evans, John (Newton)
Kaufman, Gerald


Bottomley, Rt Hon Arthur
Ewing, Harry (Stirling)
Kerr, Russell


Boyden, James (Bish Auck)
Faulds, Andrew
Kilroy-Silk, Robert


Bradley, Tom
Fernyhough, Rt Hon E.
Kinnock, Neil


Bray, Dr Jeremy
Fitt, Gerard (Belfast W)
Lambie, David


Brown, Hugh D. Provan)
Flannery, Martin
Lamborn, Harry


Brown, Robert C. (Newcastle W)
Fletcher, Ted (Darlington)
Lamond, James


Buchan, Norman
Foot, Rt Hon Michael
Latham, Arthur (Paddington)


Buchanan, Richard
Ford, Ben
Lee, John


Callaghan, Rt Hon J. (Cardiff SE)
Forrester, John
Lestor, Miss Joan (Eton &amp; Slough)


Callaghan, Jim (Middleton &amp; P)
Fowler, Gerald (The Wrekin)
Lever, Rt Hon Harold


Campbell, Ian
Fraser, John (Lambeth, N'w'd)
Lewis, Arthur (Newham N)


Cant, R. B.
Freeson, Rt Hon Reginald
Lewis, Ron (Carlisle)


Carmichael, Neil
Garrett, John (Norwich S)
Litterick, Tom


Carter, Ray
Garrett, W. E. (Wallsend)
Lomas, Kenneth


Carter-Jones, Lewis
George, Bruce
Loyden, Eddie


Cartwright, John
Gilbert, Dr John
Luard, Evan


Castle, Rt Hon Barbara
Ginsburg, David
Lyon, Alexander (York)


Clemitson, Ivor
Golding, John
Lyons, Edward (Bradford W)


Cocks, Rt Hon Michael (Bristol S)
Gould, Bryan
Mabon, Rt Hon Dr J. Dickson


Cohen, Stanley
Gourlay, Harry
McCartney, Hugh


Coleman, Donald
Grant, George (Morpeth)
McDonald, Dr Oonagh


Colquhoun, Ms Maureen
Grant, John (Islington C)
McElhone, Frank


Concannon, J. D.
Grocott, Bruce
McGuire, Michael (Ince)


Conlan, Bernard
Hamilton, James (Bothwell)
MacKenzie, Rt Hon Gregor


Cook, Robin F. (Edin C)
Hamilton, W. W. (Central Fife)
Maclennan, Robert


Corbett, Robin
Hardy, Peter
McMillan, Tom (Glasgow C)


Cowans, Harry
Harper, Joseph
McNamara, Kevin


Craigen, Jim (Maryhill)
Harrison, Rt Hon Walter
Madden, Max


Crawshaw, Richard
Hart, Rt Hon Judith
Magee, Bryan


Crowther, Stan (Rotherham)
Hattersley, Rt Hon Roy
Mahon, Simon


Cryer, Bob
Hayman, Mrs Helene
Mallalieu, J. P. W.


Cunningham, Dr J. (Whiteh)
Healey, Rt Hon Denis
Marks, Kenneth


Davidson, Arthur
Heffer, Eric S.
Marshall, Dr Edmund (Goole)


Davies, Bryan (Enfield N)
Hooley, Frank
Marshall, Jim (Leicester S)







Mason, Rt Hon Roy
Roberts, Albert (Normanton)
Thorne, Stan (Preston S)


Meacher, Michael
Roberts, Gwilym (Cannock)
Tierney, Sydney


Mellish, Rt Hon Robert
Robinson, Geoffrey
Tilley, John (Lambeth, Central)


Mendelson, John
Roderick, Caerwyn
Tinn, James


Mikardo, Ian
Rodbers, George (Chorley)
Tomlinson, John


Millan, Rt Hon Bruce
Rodgers, Rt Hon William (Stockton)
Tomney, Frank


Miller, Dr M. S. (E Kilbride)
Rooker, J. W.
Torney, Tom


Mitchell, Austin
Roper, John
Tuck, Raphael


Molloy, William
Ross, Rt Hon W. (Kilmarnock)
Urwin, T. W.


Moonman, Eric
Rowlands, Ted
Varley, Rt Hon Eric G.


Morris, Alfred (Wythenshawe)
Ryman, John
Wainwright, Edwin (Dearne V)


Morris, Charles R. (Openshaw)
Sandelson, Neville
Walker, Harold (Doncaster)


Morris, Rt Hon J. (Aberavon)
Sedgemore, Brian
Walker, Terry (Kingswood)


Moyle, Roland
Selby, Harry
Ward, Michael


Mulley, Rt Hon Frederick
Sever, John
Watkins, David


Murray, Rt Hon Ronald King
Shaw, Arnold (Ilford South)
Watkinson, John


Newens, Stanley
Sheldon, Rt Hon Robert
Weitzman, David


Noble, Mike
Shore, Rt Hon Peter
Wellbeloved, James


Oakes, Gordon
Short, Mrs Renée (Wolv NE)
White, Frank R. (Bury)


Ogden, Eric
Silkin, Rt Hon S. C. (Dulwich)
White, James (Pollock)


O'Halloran, Michael
Sillars, James
Whitehead, Philip


Orbach, Maurice
Silverman, Julius
Whitlock, William


Orme, Rt Hon Stanley
Skinner, Dennis
Willey, Rt Hon Frederick


Ovenden, John
Smith, John (N Lanarkshire)
Willams, Rt Hon Alan (Swansea W)


Owen, Rt Hon Dr David
Snape, Peter
Williams, Alan Lee (Hornch'ch)


Padley, Walter
Spearing, Nigel
Williams, Rt Hon Shirley (Hertford)


Park, George
Spriggs, Leslie
Wilson, Rt Hon Sir Harold (Huyton)


Parker, John
Stallard, A. W.
Wilson, William (Coventry SE)


Parry, Robert
Stewart, Rt Hon M. (Fulham)
Wise, Mrs Audrey


Pavitt, Laurie
Stoddart, David
Woodall, Alec


Pendry, Tom
Stott, Roger
Woof, Robert


Perry, Ernest
Strauss, Rt Hon G. R.
Wrigglesworth, Ian


Phipps, Dr Colin
Summerskill, Hon Dr Shirley
Young, David (Bolton E)


Price, C. (Lewisham W)
Swain, Thomas



Price, William (Rugby)
Taylor, Mrs Ann (Bolton W)
TELLERS FOR THE NOES:


Radice, Giles
Thomas, Jeffrey (Abertillery)
Mr. Ted Graham and


Rees, Rt Hon Merlyn (Leeds S)
Thomas, Mike (Newcastle E)
Mr. Thomas Cox.


Richardson, Miss Jo
Thomas, Ron (Bristol NW)

Question accordingly negatived.

Mr. Paul Dean: I beg to move Amendment No. 14, in page 10, line 25, leave out "sixty-five" and insert "sixty".

The First Deputy Chairman: With this we may take the following amendments: No. 15, in page 10, line 25, after "more", insert
or in the case of a single woman that her age was sixty years or more".
No. 17, in page 10, line 25, leave out from "shall" to end of line 27 and insert "not apply".

Mr. Dean: At this hour of the night I do not have time to do full justice to the importance of the amendment. Therefore, I intend to be extremely brief.
The intention of the amendment is to soften the effect of the savings trap on those who are forced to retire between the ages of 60 years and 65 years. These are the people who are the in-betweens. They are retired, they do not get a national insurance pension, and they are not treated as retired by the tax system. They get no age allowance for income tax, and they have the investment income surcharge levied on them at the higher rate applying to those over the age of 65 years. The proposal in the amendment

is that the lower rate of the surcharge should apply from 60 years instead of 65 years. I realise that it is not an ideal amendment, and it is designed primarily as a peg on which to hang an argument on behalf of this section of the community.
There are two main propositions that I put briefly to the Government. The first is that there is a great disincentive to saving as well as earning with the present arrangements. It used to be possible to talk about the rewards of thrift and the security built up for retirement by saving during working life. There was the concept of the family nest egg salted away. All too often today thrift and saving mean not rewards but tax penalties. In too many families the lesson of experience is that it is a mug's game to save. It is often considered far better to blue the lot, spend up to the hilt and rely on the State. What will become of family responsibility and the moral fibre of Britain if we allow that to continue?
My second main proposition is that those who are the hardest hit are often the in-betweens, those who are forced to retire early before the State retirement age. In some cases this is a welcome relief from work, and it can assist the promotion ladder in the firms concerned


and ease the problems of unemployment. But in all too many cases it is a great shock to the people concerned. It means that their purpose in life can disappear, and that they can feel rejected and unwanted. This is a growing problem. Each year there will be a larger number of people who are in this position. At present, the tax system does not recognise it, and it must do so.
11.30 p.m.
On the pension side there are many arrangements working towards flexible retirement ages. I welcome these. The miners' early retirement scheme is one example in the public sector, and there are many others that could be quoted. But there is a rigidity in the taxation system. It is not responding to the greater flexibility that is now being introduced into pension arrangements. The financial effect on people who retire before the age of 65 can be very severe. They usually suffer a drop in income; they probably have a scaled-down pension because they retire early; they get no national insurance pension until they are 65; they have little or no prospects of earning; in many cases they have financial commitments which are geared to retirement at the age of 65 and which it is not possible to alter; they get no age allowance for income tax purposes; and they are subject to the higher rate of surcharge on their investment income.
I want to quote very briefly a typical example of a constituent of mine. He was forced to retire at the age of 60 after 38 years' service. He has no hope of another job. On his early retirement he received a lump sum from his pension scheme and also a severance payment. As a result of investing these lump sums he is now being clobbered by the investment income surcharge. In other words, he has lost his job; he has lost his earning capacity; he has a lower income, at a higher tax rate. He cannot even invest his lump sums and his severance payments in the retirement issue of national savings certificates. Here is the savings trap with a vengeance.
I suggest that if flexible retirement is to work effectively the tax system must respond in a way in which it is not doing now, and that if a person is genuinely retired the tax system should treat him as such. What I am in effect suggesting

is that there should be a retirement allowance for income tax purposes rather than the existing age allowance operating from the age of 65. I am also suggesting that the lower rate of investment income surcharge should operate from the date of genuine retirement.
I realise that there are difficulties in this proposal. Above all, there is the question how one defines bona fide retirement. It is for that reason that I suggest a compromise in this amendment, and if the Government are not prepared to consider reducing the age limit to 60 at least they should seriously consider reducing it to the age of 64, because they are advocating that, if possible, people should retire one year early.
This amendment, then, is a modest step to try to deal with a problem which will affect a growing number of people over the years, in view of the present high level of unemployment and the tendency towards earlier and more flexible retirement.

Mr. Robert Sheldon: Under the Bill there is a higher threshold of £2,500 for investment income surcharge for those taxpayers and their wives who are over 65 years of age compared with the level of £1,700 for those under that age. The amendment seeks to reduce the qualifying age for investment income surcharge.
The reason for the higher threshold for investment income surcharge is that, as one gets older, one's taxable capacity is diminished due to the disabilities of various kinds that come with age. That is recognised in both the investment income surcharge and the age allowance. The question is: what account should be taken of the disabilities of the elderly?
The age criterion has been selected for the higher investment income surcharge thresholds. It is not a question of retirement. The thresholds are determined by reference to taxpayers' ages. But now and more likely in future there is and will be a wide range of different ages for retirement. If we were to award the higher thresholds at the age of retirement, we could find ourselves facing arguments in favour of extending the higher thresholds to those under 65 years of age.
I accept that the ages of 65 and 60 are not sacrosanct, but a decision has to be made about what ages should be chosen.


These are the ages that have been selected, for different reasons, for retirement, but they are not related to the disabilities of people as they get older and have increasing problems in coping with the normal operation of running their homes.
Nowadays we have the young and the old retired. An interesting feature of our community today is that the retirement age spans a considerable number of people with different levels of ability to conduct their affairs. The only sensible way to make the decisions as to where the cut-off should come for tax purpose is on the age of the person, not on his retirement.
Unfortunately, our tax system cannot be refined to cope with individual problems in the way that the social security system can be operated. We believe that 65 years of age—obviously this will change with time as circumstances generally change—is the right age to give assistance in this way to the elderly. We believe that what we have done for the elderly this year, both in the age allowance and in the improvements in the investment income surcharge, as well as in

the pension payments that we make available, is the right way to proceed. I believe that this is the way that we should continue to act. I urge the Committee to reject the amendment.

Mr. Paul Dean: In view of the lateness of the hour and the fact that there is a lot of business still to be proceeded with, I shall content myself by saying that I am very disappointed with the Government's response to this matter. I intend to return to the subject at the earliest possible moment. But now I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment No. 20 proposed, in page 10, line 29, leave out lines 29 to 38 and insert—


'Part of excess over £8,000


Higher Rate


The first £2,000
…
…
40 per cent.


The next £4,000
…
…
50 per cent.


The next £7,000
…
…
60 per cent.


The remainder
…
…
70 per cent.'.


—[Sir G. Howe.]

Question put, That the amendment be made:—

The Committee divided: Ayes 278, Noes 284.

Division No. 205]
AYES
[11.39 p.m.


Adley Robert
Churchill, W. S.
Galbraith, Hon T. G. D.


Aitken, Jonathan
Clark, Alan (Plymouth, Sutton)
Gardiner, George (Reigate)


Alison, Michael
Clark, William (Croydon S)
Gardiner, Edwards (S Fylde)


Arnold, Tom
Clarke, Kenneth (Rushcliffe)
Gilmour, Rt Hon Ian (Chesham)


Atkins, Rt Hon H. (Spelthorne)
Clegg, Walter
Gilmour, Sir John (East Fife)


Atkinson, David (Bournemouth, East)
Cockcroft, John
Glyn, Dr Alan


Awdry, Daniel
Cooke, Robert (Bristol W)
Godber, Rt Hon Joseph


Baker, Kenneth
Cope, John
Goodhart, Philip


Banks, Robert
Cormack, Patrick
Goodlad, Alastair


Beith, A. J.
Costain, A. P.
Gorst, John


Bell, Ronald
Craig, Rt Hon W. (Belfast E)
Gow, Ian (Eastbourne)


Bendall, Vivian (Ilford North)
Critchley, Julian
Gower, Sir Raymond (Barry)


Bennett, Sir Frederic (Torbay)
Crouch, David
Grant, Anthony (Harrow C)


Benyon, W.
Crowder F. P.
Gray, Hamish


Berry, Hon Anthony
Davies, Rt Hon J. (Knutsford)
Griffiths, Eldon


Biffen, John
Dean, Paul (N Somerset)
Grimond, Rt Hon J.


Biggs-Davidson, John
Dodsworth, Geoffrey
Grist, Ian


Blaker, Peter
Douglas-Hamilton, Lord James
Grylls, Michael


Body, Richard
Drayson, Burnaby
Hall-Davis, A. G. F.


Boscawen, Hon Robert
du Cann, Rt Hon Edward
Hamilton, Archibald (Epsom &amp; Ewell)


Bottomley, Peter
Dunlop, John
Hamilton, Michael (Salisbury)


Bowden, A. (Brighton, Kemptown)
Durant, Tony
Hampson, Dr Keith


Boyson, Dr Rhodes (Brent)
Dykes, Hugh
Hannam, John


Bradford, Rev Robert
Eden, Rt Hon Sir John
Harrison, Col Sir Harwood (Eye)


Braine, Sir Bernard
Edwards, Nicholas (Pembroke)
Harvie Anderson, Rt Hon Miss


Brittan, Leon
Elliott, Sir William
Haselhurst, Alan


Brocklebank-Fowler, C.
Emery, Peter
Hastings, Stephen


Brooke, Peter
Eyre, Reginald
Havers, Rt Hon Sir Michael


Brotherton, Michael
Fairbairn, Nicholas
Hawkins, Paul


Bryan, Sir Paul
Farr, John
Hayhoe, Barney


Buchanan-Smith, Alick
Fell, Anthony
Heseltine, Michael


Buck, Antony
Finsberg, Geoffrey
Hicks, Robert


Budgen, Nick
Fisher, Sir Nigel
Higgins, Terence L.


Bulmer, Esmond
Fookes, Miss Janet
Hodgson, Robin


Burden, F. A.
Forman, Nigel
Holland, Philip


Butler, Adam (Bosworth)
Fowler, Norman (Sutton C'f'd)
Hooson, Emlyn


Carlisle, Mark
Fox, Marcus
Hordern, Peter


Carson, John
Fraser, Rt Hon H. (Stafford &amp; St)
Howe, Rt Hon Sir Geoffrey


Chalker, Mrs Lynda
Freud, Clement
Howell, David (Guildford)


Channon, Paul
Fry, Peter
Howells, Geraint (Cardigan)




Hunt, David (Wirral)
Moate, Roger
Shelton, William (Streatham)


Hunt, John (Ravensbourne)
Molyneaux, James
Shepherd, Colin


Hurd, Douglas
Monro, Hector
Shersby, Michael


Hutchison, Michael Clark
Montgomery, Fergus
Silvester, Fred


Irving, Charles (Cheltenham)
Moore, John (Croydon C)
Sims, Roger


James, David
More, Jasper (Ludlow)
Sinclair, Sir George


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Morgan, Geraint
Skeet, T. H. H.


Jessel, Toby
Morris, Michael (Northampton S)
Smith, Cyril (Rochdale)


Johnson Smith, G. (E Grinstead)
Morrison, Charles (Devizes)
Smith, Dudley (Warwick)


Johnston, Russell (Inverness)
Morrison, Hon Peter (Chester)
Smith, Timothy John (Ashfield)


Jones, Arthur (Daventry)
Mudd, David
Speed, Keith


Jopling, Michael
Neave, Airey
Spence, John


Joseph, Rt Hon Sir Keith
Neubert, Michael
Spicer, Michael (S Worcester)


Kaberry, Sir Donald
Newton, Tony
Sproat, Iain


Kershaw, Anthony
Nott, John
Stainton, Keith


Kimball, Marcus
Onslow Cranley
Stanbrook, Ivor


King, Evelyn (South Dorset)
Oppenheim, Mrs Sally
Stanley, John


King, Tom (Bridgwater)
Page, John (Harrow West)
Steel, Rt Hon David


Kitson, Sir Timothy
Page, Rt Hon R. Graham (Crosby)
Steen, Anthony (Wavertree)


Knight, Mrs Jill
Page, Richard (Workington)
Stewart, Ian (Hitchin)


Knox, David
Paisley, Rev Ian
Stokes, John


Lamont, Norman
Pardoe, John
Stradling Thomas, J.


Langford-Holt, Sir John
Parkinson, Cecil
Tapsell, Peter


Latham, Michael (Melton)
Pattie, Geoffrey
Taylor, R. (Croydon NW)


Lawrence, Ivan
Penhaligon, David
Tebbit, Norman


Lawson, Nigel
Percival, Ian
Temple-Morris, Peter


Lester, Jim (Beeston)
Peyton, Rt Hon John
Thatcher, Rt Hon Margaret


Lewis, Kenneth (Rutland)
Pink, R. Bonner
Thomas, Rt Hon P. (Hendon S)


Loveridge, John
Powell, Rt Hon J. Enoch
Thorpe, Rt Hon Jeremy (N Devon)


Luce, Richard
Prentice, Rt Hon Reg
Townsend, Cyril D.


McAdden, Sir Stephen
Price, David (Eastleigh)
Trotter, Neville


McCrindle, Robert
Prior, Rt Hon James
van Straubenzee, W. R.


McCusker, H.
Pym, Rt Hon Francis
Vaughan, Dr Gerald


Macfarlane, Neil
Raison, Timothy
Viggers, Peter


MacGregor, John
Rathbone, Tim
Wainwright, Richard (Colne V)


MacKay, Andrew (Stechford)
Rees, Peter (Dover &amp; Deal)
Wakeham, John


Macmillan, Rt Hon M. (Farnham)
Rees-Davies, W. R.
Walder, David (Clitheroe)


McNair-Wilson, M. (Newbury)
Renton, Rt Hon Sir D. (Hunts)
Walker, Rt Hon P. (Worcester)


McNair-Wilson, p. (New Forest)
Renton, Tim (Mid-Sussex)
Wall, Patrick


Madel, David
Rhodes, James R.
Walters, Dennis


Marshall, Michael (Arundel)
Ridley, Hon Nicholas
Warren, Kenneth


Marten, Neil
Ridsdale, Julian
Weatherill, Bernard


Mates, Michael
Rifkind, Malcolm
Wells, John


Mather, Carol
Rippon, Rt Hon Geoffrey
Whitelaw, Rt Hon William


Maude, Angus
Roberts, Wyn (Conway)
Whitney, Raymond (Wycombe)


Maudling, Rt Hon Reginald
Rodgers, Sir John (Sevenoaks)
Wiggin, Jerry


Mawby, Ray
Ross, Stephen (Isle of Wight)
Winterton, Nicholas


Maxwell-Hyslop, Robin
Ross, William (Londonderry)
Wood, Rt Hon Richard


Mayhew, Patrick
Rossi, Hugh (Hornsey)
Young, Sir G. (Ealing, Acton)


Meyer, Sir Anthony
Royle, Sir Anthony
Younger, Hon George


Miller, Hal (Bromsgrove)
Sainsbury, Tim



Mills, Peter
St. John-Stevas, Norman
TELLERS FOR THE AYES:


Miscampbell, Norman
Scott, Nicholas
Mr. Spencer Le Marchant and


Mitchell, David (Basingstoke)
Shaw, Giles (Pudsey)
Mr. Michael Roberts.




NOES


Abse, Leo
Buchanan, Richard
Davies, Bryan (Enfield N)


Allaun, Frank
Callaghan, Rt Hon J. (Cardiff SE)
Davies, Rt Hon Denzil


Anderson, Donald
Callaghan, Jim (Middleton &amp; P)
Davies, Ifor (Gower)


Archer, Rt Hon Peter
Campbell, Ian
Davis, Clinton (Hackney C)


Armstrong, Ernest
Canavan, Dennis
Deakins, Eric


Ashley, Jack
Cant, R. B.
Dean, Joseph (Leeds West)


Ashton, Joe
Carmichael, Neil
Dell, Rt Hon Edmund


Atkinson, Norman
Carter, Ray
Dempsey, James


Bagier, Gordon A. T.
Carter-Jones, Lewis
Dewar, Donald


Bain, Mrs Margaret
Cartwright, John
Doig, Peter


Barnett, Guy (Greenwich)
Castle, Rt Hon Barbara
Dormand, J. D.


Barnett, Rt Hon Joel (Heywood)
Clemitson, Ivor
Douglas-Mann, Bruce


Bates, Alf
Cocks, Rt Hon Michael (Bristol S)
Duffy, A. E. P.


Bean, R. E.
Cohen, Stanley
Dunn, James A.


Benn, Rt Hon Anthony Wedgwood
Coleman, Donald
Dunnett, Jack


Bennett, Andrew (Stockport N)
Colquhoun, Ms Maureen
Eadie, Alx


Bidwell, Sydney
Concannon, Rt Hon John
Edge, Geoff


Bishop, Rt Hon Edward
Conlan, Bernard
Ellis, John (Brigg &amp; Scun)


Blenkinsop, Arthur
Cook, Robin F. (Edin C)
English, Michael


Boardman, H.
Corbett, Robin
Ennals, Rt Hon David


Booth, Rt Hon Albert
Cowans, Harry
Evans, Gwynfor (Carmarthen)


Boothroyd, Miss Betty
Cox, Thomas (Tooting)
Evans, Ioan (Aberdare)


Bottomley, Rt Hon Arthur
Craigen, Jim (Maryhill)
Evans, John (Newton)


Boyden, James (Bish Auck)
Crawford, Douglas
Faulds, Andrew


Bradley, Tom
Crawshaw, Richard
Fernyhough, Rt Hon E.


Bray, Dr Jeremy
Crowther, Stan (Rotherham)
Flannery, Martin


Brown, Hugh D. Provan)
Cryer, Bob
Fletcher, Ted (Darlington)


Brown, Robert C. (Newcastle W)
Cunningham, Dr J. (Whiteh)
Foot, Rt Hon Michael


Buchan, Norman
Davidson, Arthur
Ford, Ben







Forrester, John
MacCormick, Iain
Sever, John


Fowler, Gerald (The Wrekin)
McDonald, Dr Oonagh
Shaw, Arnold (Ilford South)


Fraser, John (Lambeth, N'w'd)
McElhone, Frank
Sheldon, Rt Hon Robert


Freeson, Rt Hon Reginald
McGuire, Michael (Ince)
Shore, Rt Hon Peter


Garrett, John (Norwich S)
MacKenzie, Rt Hon Gregor
Short, Mrs Renée (Wolv NE)


Garrett, W. E. (Wallsend)
Maclennan, Robert
Silkin, Rt Hon S. C. (Dulwich)


George, Bruce
McMillan, Tom (Glasgow C)
Silverman, Julius


Gilbert, Rt Hon Dr John
McNamara, Kevin
Skinner, Dennis


Ginsburg, David
Madden, Max
Smith, John (N Lanarkshire)


Golding, John
Magee, Bryan
Snape, Peter


Gould, Bryan
Mahon, Simon
Spearing, Nigel


Gourlay, Harry
Mallalieu, J. P. W.
Spriggs, Leslie


Graham, Ted
Marks, Kenneth
Stallard, A. W.


Grant, George (Morpeth)
Marshall, Dr Edmund (Goole)
Stewart, Rt Hon Donald


Grant, John (Islington C)
Marshall, Jim (Leicester S)
Stewart, Rt Hon M. (Fulham)


Grocott, Bruce
Mason, Rt Hon Roy
Stoddart, David


Hamilton, W. W. (Central Fife)
Meacher, Michael
Stott, Roger


Hardy, Peter
Mellish, Rt Hon Robert
Strauss, Rt Hon G. R.


Harrison, Rt Hon Walter
Mendelson, John
Summerskill, Hon Dr Shirley


Hart, Rt Hon Judith
Mikardo, Ian
Swain, Thomas


Hattersley, Rt Hon Roy
Millan, Rt Hon Bruce
Taylor, Mrs Ann (Bolton W)


Hayman, Mrs Helene
Miller, Dr M. S. (E Kilbride)
Thomas, Dafydd (Merioneth)


Healey, Rt Hon Denis
Mitchell, Austin
Thomas, Jeffrey (Abertillery)


Heffer, Eric S.
Molloy, William
Thomas, Mike (Newcastle E)


Henderson, Douglas
Moonman, Eric
Thomas, Ron (Bristol NW)


Hooley, Frank
Morris, Alfred (Wythenshawe)
Thompson, George


Horam, John
Morris, Rt Hon Charles R.
Thorne, Stan (Preston S)


Howell, Rt Hon Denis (B'ham, Sm H)
Morris, Rt Hon J. (Aberavon)
Tierney, Sydney


Hoyle, Doug (Nelson)
Moyle, Roland
Tilley, John (Lambeth, Central)


Huckfield, Les
Mulley, Rt Hon Frederick
Tinn, James


Hughes, Rt Hon C. (Anglesey)
Murray, Rt Hon Ronald King
Tomlinson, John


Hughes, Robert (Aberdeen N)
Newens, Stanley
Tomney, Frank


Hughes, Roy (Newport)
Noble, Mike
Torney, Tom


Hunter, Adam
Oakes, Gordon
Tuck, Raphael


Irving, Rt Hon S. (Dartford)
Ogden, Eric
Urwin, T. W.


Jackson, Colin (Brighouse)
O'Halloran, Michael
Varley, Rt Hon Eric G.


Jackson, Miss Margaret (Lincoln)
Orbach, Maurice
Wainwright, Edwin (Dearne V)


Janner, Greville
Orme, Rt Hon Stanley
Walker, Harold (Doncaster)


Jay, Rt Hon Douglas
Ovenden, John
Walker, Terry (Kingswood)


Jeger, Mrs Lena
Owen, Rt Hon Dr David
Ward, Michael


Jenkins, Hugh (Putney)
Park, George
Watkins, David


John, Brynmor
Parker, John
Watkinson, John


Johnson, James (Hull West)
Parry, Robert
Watt, Hamish


Jones, Alec (Rhondda)
Pavitt, Laurie
Weitzman, David


Jones, Barry (East Flint)
Pendry, Tom
Wellbeloved, James


Judd, Frank
Perry, Ernest
Welsh, Andrew


Kaufman, Gerald
Phipps, Dr Colin
White, Frank R. (Bury)


Kerr, Russell
Price, C. (Lewisham W)
White, James (Pollock)


Kilroy-Silk, Robert
Price, William (Rugby)
Whitehead, Philip


Kinnock, Neil
Radice, Giles
Whitlock, William


Lambie, David
Rees, Rt Hon Merlyn (Leeds S)
Wigley, Dafydd


Lamborn, Harry
Reid, George
Willey, Rt Hon Frederick


Lamond, James
Richardson, Miss Jo
Willams, Rt Hon Alan (Swansea W)


Latham, Arthur (Paddington)
Roberts, Albert (Normanton)
Williams, Alan Lee (Hornch'ch)


Lee, John
Roberts, Gwilym (Cannock)
Williams, Rt Hon Shirley (Hertford)


Lestor, Miss Joan (Eton &amp; Slough)
Robinson, Geoffrey
Wilson, Gordon (Dundee E)


Lever, Rt Hon Harold
Roderick, Caerwyn
Wilson, Rt Hon Sir Harold (Huyton)


Lewis, Arthur (Newham N)
Rodgers, George (Chorley)
Wilson, William (Coventry SE)


Lewis, Ron (Carlisle)
Rodgers, Rt Hon William (Stockton)
Wise, Mrs Audrey


Litterick, Tom
Rooker, J. W.
Woodall, Alec


Lomas, Kenneth
Roper, John
Woof, Robert


Loyden, Eddie
Ross, Rt Hon W. (Kilmarnock)
Wrigglesworth, Ian


Luard, Evan
Rowlands, Ted
Young, David (Bolton E)


Lyon, Alexander (York)
Ryman, John



Lyons, Edward (Bradford W)
Sandelson, Neville
TELLERS FOR THE NOES:


Mabon, Rt Hon Dr J. Dickson
Sedgemore, Brian
Mr. Joseph Harper and


McCartney, Hugh
Selby, Harry
Mr. James Hamilton.

Question accordingly negatived.

Sir G. Howe: On a point of order, Sir Meyer. The Committee will recollect that we voted earlier on Amendment No. 7, the first of the group of amendments dealing with the starting point of the higher rate bands of income tax. In that vote, the Committee decided to replace the figure of £7,000 by £8,000. We have just voted on Amendment No. 20, which was designed to replace the table

setting out those rates and starting at £8,000. We have not been able to carry that amendment. [HON. MEMBERS: "Resign."] We are not the Government yet, though it will not be long before we are.
It follows that we ought to have an opportunity of carrying an amendment that I think should be consequential—if, indeed, it is necessary at all—to change the title of the table from
Part of excess over £7,000


so that it reads:
Part of excess over £8,000".
It is not entirely clear whether an amendment is necessary for that purpose or not. I think that it follows from Amendment No. 7 which was carried. In order to set that matter beyond doubt, if it is necessary to do so, I have here a manuscript amendment, in Clause 11, page 10, line 29, leave out '£7,000' and insert '£8,000'.
The effect of the amendment is simply to carry into the second part of the clause the principle in favour of which the Committee has voted. If it is necessary, and so that we may vote on it now, I table it at once.

Mr. Joel Barnett: Further to that point of order, Sir Myer. It is remarkable that the right hon. and learned Gentleman should be asking the Committee to vote on an amendment which none of us has seen. He is not sure that it is necessary or that the drafting is right. He is not sure that it is needed. In those circumstances, I should have thought it would be much better to report Progress and see the manuscript amendment in print in good time for when we come back to the Committee on Tuesday.
I beg to move, That the Chairman do report Progress and ask leave to sit again.

12 midnight.

Sir G. Howe: In any normal Parliament, and in a situation where we were not faced with a Government struggling to hang on to power by any means open to them, this amendment would have been consequential and therefore accepted without hesitation or demur by the Chancellor. On that basis it should be accepted and voted upon, if necessary. It follows as a consequence of the vote that took place earlier when the Committee decided the principle.

Mr. Joel Barnett: The right hon. and learned Gentleman has created a shambles. It is absurd that the Committee should be expected to vote on an amendment that it has not even seen.

The First Deputy Chairman: The Chair has a very distinctive duty in the situation that has arisen. The manuscript amendment is consequential on a

decision already reached by the Committee. In these circumstances it is the duty of the Chair to select the manuscript amendment. Similarly, I am prepared to accept the motion to report Progress.

Mr. Lawson: rose—

Hon. Members: Sit down, sit down.

The First Deputy Chairman: Order. I am sure that not all hon. Members are Liverpool supporters. The motion is debatable—I have no option.

Mr. Lawson: I am grateful for your ruling, Sir Myer. It is a disgrace that the motion should have been put in the first place. The Chancellor and his hon. Friends knew perfectly well that our amendment was consequential on the decision already taken by the Committee.
The Minister of State, Treasury, opposing the amendment, gave as the cost of the amendment an amount which related to the consequential amendment as well. However, later the Chancellor of the Exchequer thought that cheating was the only way out of the corner in which he found himself. He thought that he had to be a trickster and in this way he is trying to wriggle out of the jam in which he finds himself—[Interruption.]

The First Deputy Chairman: Order. There is far too much noise, and during the course of the noise some unparliamentary language was used. I must call upon the hon. Member for Blaby (Mr. Lawson) to withdraw the words "cheat" and "trickster".

Mr. Lawson: If I may quote the hon. Member for—

Hon. Members: Withdraw.

The First Deputy Chairman: I must ask the hon. Member for Blaby to withdraw the terms.

Mr. Lawson: I was quoting the hon. Member for Penistone (Mr. Mendelson), who used the term "trickster" earlier in the day.

Hon. Members: Withdraw.

The First Deputy Chairman: Order. Let us end the proceedings on a peaceful note. I have acted strictly according to the duties of the Chair. A manuscript


amendment has been presented and I have selected it. Similarly, the motion to report Progress is equally in order. The hon. Member for Blaby has used certain unparliamentary terms and I must call upon him to withdraw them.

Hon. Members: Withdraw.

Mr Lawson: May I ask you, Sir Myer, why the hon. Member for Penistone was able to use these terms much earlier in the debate but I am not permitted to do so?

The First Deputy Chairman: I was not in the Chair when that incident occurred, but I know the arguments which arose as to whether it was applied to an hon. Member or to a group of people. The hon. Member for Penistone (Mr. Mendelson) insisted that it was not applied to an hon. Member, and in that respect it was not withdrawn and was not unparliamentary. The hon. Member for Blaby (Mr. Lawson) has made a definite accusation against a member of the Government Front Bench. I must ask him to withdraw it, and I hope that he will do so.

Mr. Lawson: I will withdraw, in the same terms as the hon. Member for Penistone used: it was applied not to an individual Member but to a group.

The First Deputy Chairman: I appeal to the hon. Gentleman to withdraw the accusation that he hurled at the Chancellor, of being a cheat and a trickster, and I hope he will do so.

Mr. Lawson: As I said, I will withdraw it in the same way as the hon. Member for Penistone withdrew, and say that it was not applied to any individual Member.
It would be disgraceful for the Committee to report Progress now. This debate must be brought to a conclusion. It has been agreed that it should go to a conclusion and that is what should be done.

Question put, That the Chairman do report Progress and ask leave to sit again:—

The Committee divided: Ayes 273, Noes 280.

Division No. 206]
AYES
[12.06 a.m.


Abse, Leo
Colquhoun, Ms Maureen
Forrester, John


Allaun, Frank
Concannon, Rt Hon John
Fowler, Gerald (The Wrekin)


Anderson, Donald
Conlan, Bernard
Fraser, John (Lambeth, N'w'd)


Archer, Rt Hon Peter
Cook, Robin F. (Edin C)
Freeson, Rt Hon Reginald


Armstrong, Ernest
Corbett, Robin
Garrett, John (Norwich S)


Ashley, Jack
Cowans, Harry
Garrett, W. E. (Wallsend)


Ashton, Joe
Cox, Thomas (Tooting)
George, Bruce


Atkinson, Norman
Craigen, Jim (Maryhill)
Gilbert, Rt Hon Dr John


Bagier, Gordon A. T.
Crawshaw, Richard
Ginsburg, David


Barnett, Guy (Greenwich)
Crowther, Stan (Rotherham)
Golding, John


Barnett, Rt Hon Joel (Heywood)
Cryer, Bob
Gould, Bryan


Bates, Alf
Cunningham, Dr J. (Whiteh)
Gourlay, Harry


Bean, R. E.
Davidson, Arthur
Graham, Ted


Benn, Rt Hon Anthony Wedgwood
Davies, Bryan (Enfield N)
Grant, George (Morpeth)


Bennett, Andrew (Stockport N)
Davies, Rt Hon Denzil
Grant, John (Islington C)


Bidwell, Sydney
Davies, Ifor (Gower)
Grocott, Bruce


Bishop, Rt Hon Edward
Davis, Clinton (Hackney C)
Hamilton, W. W. (Central Fife)


Blenkinsop, Arthur
Deakins, Eric
Hardy, Peter


Boardman, H.
Dean, Joseph (Leeds West)
Harper, Joseph


Booth, Rt Hon Albert
Dell, Rt Hon Edmund
Harrison, Rt Hon Walter


Boothroyd, Miss Betty
Dempsey, James
Hart, Rt Hon Judith


Bottomley, Rt Hon Arthur
Dewar, Donald
Hattersley, Rt Hon Roy


Boyden, James (Bish Auck)
Doig, Peter
Hayman, Mrs Helene


Bradley, Tom
Dormand, J. D.
Healey, Rt Hon Denis


Bray, Dr Jeremy
Douglas-Mann, Bruce
Heffer, Eric S.


Brown, Hugh D. Provan)
Duffy, A. E. P.
Hooley, Frank


Brown, Robert C. (Newcastle W)
Dunn, James A.
Horam, John


Buchan, Norman
Dunnett, Jack
Howell, Rt Hon Denis (B'ham, Sm H)


Buchanan, Richard
Eadie, Alex
Hoyle, Doug (Nelson)


Callaghan, Rt Hon J. (Cardiff SE)
Edge, Geoff
Huckfield, Les


Callaghan, Jim (Middleton &amp; P)
Ellis, John (Brigg &amp; Scun)
Hughes, Rt Hon C. (Anglesey)


Campbell, Ian
English, Michael
Hughes, Robert (Aberdeen N)


Canavan, Dennis
Ennals, Rt Hon David
Hughes, Roy (Newport)


Cant, R. B.
Evans, Gwynfor (Carmarthen)
Hunter, Adam


Carmichael, Neil
Evans, Ioan (Aberdare)
Irving, Rt Hon S. (Dartford)


Carter, Ray
Evans, John (Newton)
Jackson, Colin (Brighouse)


Carter-Jones, Lewis
Ewing, Harry (Stirling)
Jackson, Miss Margaret (Lincoln)


Cartwright, John
Faulds, Andrew
Janner, Greville


Castle, Rt Hon Barbara
Fernyhough, Rt Hon E.
Jay, Rt Hon Douglas


Clemitson, Ivor
Flannery, Martin
Jeger, Mrs Lena


Cocks, Rt Hon Michael (Bristol S)
Fletcher, Ted (Darlington)
Jenkins, Hugh (Putney)


Cohen, Stanley
Foot, Rt Hon Michael
John, Brynmor


Coleman, Donald
Ford, Ben
Johnson, James (Hull West)




Jones, Alec (Rhondda)
Moyle, Roland
Stewart, Rt Hon M. (Fulham)


Jones, Barry (East Flint)
Mulley, Rt Hon Frederick
Stoddart, David


Judd, Frank
Murray, Rt Hon Ronald King
Stott, Roger


Kaufman, Gerald
Newens, Stanley
Strauss, Rt Hon G. R.


Kerr, Russell
Noble, Mike
Summerskill, Hon Dr Shirley


Kilroy-Silk, Robert
Oakes, Gordon
Swain, Thomas


Kinnock, Neil
Ogden, Eric
Taylor, Mrs Ann (Bolton W)


Lambie, David
O'Halloran, Michael
Thomas, Dafydd (Merioneth)


Lamborn, Harry
Orbach, Maurice
Thomas, Jeffrey (Abertillery)


Lamond, James
Orme, Rt Hon Stanley
Thomas, Mike (Newcastle E)


Latham, Arthur (Paddington)
Ovenden, John
Thomas, Ron (Bristol NW)


Lee, John
Owen, Rt Hon Dr David
Thorne, Stan (Preston S)


Lestor, Miss Joan (Eton &amp; Slough)
Park, George
Tierney, Sydney


Lever, Rt Hon Harold
Parker, John
Tilley, John (Lambeth, Central)


Lewis, Ron (Carlisle)
Parry, Robert
Tinn, James


Litterick, Tom
Pavitt, Laurie
Tomlinson, John


Lomas, Kenneth
Pendry, Tom
Tomney, Frank


Loyden, Eddie
Perry, Ernest
Torney, Tom


Luard, Evan
Phipps, Dr Colin
Tuck, Raphael


Lyon, Alexander (York)
Price, C. (Lewisham W)
Urwin, T. W.


Lyons, Edward (Bradford W)
Price, William (Rugby)
Varley, Rt Hon Eric G.


Mabon, Rt Kon Dr J. Dickson
Radice, Giles
Wainwright, Edwin (Dearne V)


McCartney, Hugh
Rees, Rt Hon Merlyn (Leeds S)
Walker, Harold (Doncaster)


McDonald, Dr Oonagh
Richardson, Miss Jo
Walker, Terry (Kingswood)


McElhone, Frank
Roberts, Albert (Normanton)
Ward, Michael


McGuire, Michael (Ince)
Roberts, Gwilym (Cannock)
Watkins, David


MacKenzie, Rt Hon Gregor
Robinson, Geoffrey
Watkinson, John


Maclennan, Robert
Roderick, Caerwyn
Weitzman, David


McMillan, Tom (Glasgow C)
Rodgers, George (Chorley)
Wellbeloved, James


McNamara, Kevin
Rodgers, Rt Hon William (Stockton)
White, Frank R. (Bury)


Madden, Max
Rooker, J. W.
White, James (Pollock)


Magee, Bryan
Roper, John
Whitehead, Philip


Mahon, Simon
Ross, Rt Hon w. (Kilmarnock)
Whitlock, William


Mallalieu, J. P. W.
Rowlands, Ted
Wigley, Dafydd


Marks, Kenneth
Ryman, John
Willey, Rt Hon Frederick


Marshall, Dr Edmund (Goole)
Sandelson, Neville
Willams, Rt Hon Alan (Swansea W)


Marshall, Jim (Leicester S)
Sedgemore, Brian
Williams, Alan Lee (Hornch'ch)


Mason, Rt Hon Roy
Selby, Harry
Williams, Rt Hon Shirley (Hertford)


Meacher, Michael
Sever, John
Wilson, Rt Hon Sir Harold (Huyton)


Mellish, Rt Hon Robert
Shaw, Arnold (Ilford South)
Wilson, William (Coventry SE)


Mendelson, John
Sheldon, Rt Hon Robert
Wise, Mrs Audrey


Mikardo, Ian
Shore, Rt Hon Peter
Woodall, Alec


Millan, Rt Hon Bruce
Short, Mrs Renée (Wolv NE)
Woof, Robert


Miller, Dr M. S. (E Kilbride)
Silkin, Rt Hon S. C. (Dulwich)
Wrigglesworth, Ian


Mitchell, Austin
Silverman, Julius
Young, David (Bolton E)


Molloy, William
Skinner, Dennis



Moonman, Eric
Smith, John (N Lanarkshire)
TELLERS FOR THE AYES:


Morris, Alfred (Wythenshawe)
Spearing, Nigel
Mr. Peter Snape and


Morris, Rt Hon Charles R.
Spriggs, Leslie
Mr. James Hamilton.


Morris, Rt Hon J. (Aberavon)
Stallard, A. W.





NOES


Adley Robert
Bulmer, Esmond
Eyre, Reginald


Aitken, Jonathan
Burden, F. A.
Fairbairn, Nicholas


Alison, Michael
Butler, Adam (Bosworth)
Farr, John


Arnold, Tom
Carlisle, Mark
Fell, Anthony


Atkins, Rt Hon H. (Spelthorne)
Chalker, Mrs Lynda
Finsberg, Geoffrey


Atkinson, David (Bournemouth, East)
Channon, Paul
Fisher, sir Nigel


Awdry, Daniel
Churchill, W. S.
Fookes, Miss Janet


Bain, Mrs Margaret
Clark, Alan (Plymouth, Sutton)
Forman, Nigel


Baker, Kenneth
Clark, William (Croydon S)
Fowler, Norman (Sutton C'f'd)


Banks, Robert
Clarke, Kenneth (Rushcliffe)
Fox, Marcus


Beith, A. J.
Clegg, Walter
Fraser, Rt Hon H. (Stafford &amp; St)


Bell, Ronald
Cockcroft, John
Freud, Clement


Bendall, Vivian (Ilford North)
Cooke, Robert (Bristol W)
Fry, Peter


Bennett, Sir Frederic (Torbay)
Cope, John
Galbraith, Hon T. G. D.


Benyon, W.
Cormack, Patrick
Gardiner, George (Reigate)


Berry, Hon Anthony
Costain, A. P.
Gardiner, Edwards (S Fylde)


Biffen, John
Crawford, Douglas
Gilmour, Rt Hon Ian (Chesham)


Biggs-Davidson, John
Critchley, Julian
Gilmour, Sir John (East Fife)


Blaker, Peter
Crouch, David
Glyn, Dr Alan


Body, Richard
Crowder F. P.
Godber, Rt Hon Joseph


Boscawen, Hon Robert
Davies, Rt Hon J. (Knutsford)
Goodhart, Philip


Bottomley, Peter
Dean, Paul (N Somerset)
Goodlad, Alastair


Bowden, A. (Brighton, Kemptown)
Dodsworth, Geoffrey
Gorst, John


Boyson, Dr Rhodes (Brent)
Douglas-Hamilton, Lord James
Gow, Ian (Eastbourne)


Braine, Sir Bernard
Drayson, Burnaby
Gower, Sir Raymond (Barry)


Brittan, Leon
du Cann, Rt Hon Edward
Grant, Anthony (Harrow C)


Brocklebank-Fowler, C.
Dunlop, John
Gray, Hamish


Brooke, Peter
Durant, Tony
Griffiths, Eldon


Brotherton, Michael
Dykes, Hugh
Grimond, Rt Hon J.


Bryan, Sir Paul
Eden, Rt Hon Sir John
Grist, Ian


Buchanan-Smith, Alick
Edwards, Nicholas (Pembroke)
Grylls, Michael


Buck, Antony
Elliott, Sir William
Hall-Davis, A. G. F.


Budgen, Nick
Emery, Peter
Hamilton, Archibald (Epsom &amp; Ewell)







Hamilton, Michael (Salisbury)
Marten, Neil
St. John-Stevas, Norman


Hampson, Dr Keith
Mates, Michael
Scott, Nicholas


Hannam, John
Mather, Carol
Shaw, Giles (Pudsey)


Harrison, Col Sir Harwood (Eye)
Maude, Angus
Shelton, William (Streatham)


Harvie Anderson, Rt Hon Miss
Maudling, Rt Hon Reginald
Shepherd, Colin


Haselhurst, Alan
Mawby, Ray
Shersby, Michael


Hastings, Stephen
Maxwell-Hyslop, Robin
Silvester, Fred


Hayers, Rt Hon Sir Michael
Mayhew, Patrick
Sims, Roger


Hawkins, Paul
Meyer, Sir Anthony
Sinclair, Sir George


Hayhoe, Barney
Miller, Hal (Bromsgrove)
Skeet, T. H. H.


Henderson, Douglas
Mills, Peter
Smith, Cyril (Rochdale)


Heseltine, Michael
Miscampbell, Norman
Smith, Dudley (Warwick)


Hicks, Robert
Mitchell, David (Basingstoke)
Smith, Timothy John (Ashfield)


Higgins, Terence L.
Moate, Roger
Speed, Keith


Hodgson, Robin
Monro, Hector
Spence, John


Holland, Philip
Montgomery, Fergus
Spicer, Michael (S Worcester)


Hooson, Emlyn
Moore, John (Croydon C)
Sproat, Iain


Hordern, Peter
More, Jasper (Ludlow)
Stainton, Keith


Howe, Rt Hon Sir Geoffrey
Morgan, Geraint
Stanbrook, Ivor


Howell, David (Guildford)
Morris, Michael (Northampton S)
Stanley, John


Howells, Geraint (Cardigan)
Morrison, Charles (Devizes)
Steel, Rt Hon David


Hunt, David (Wirral)
Morrison, Hon Peter (Chester)
Steen, Anthony (Wavertree)


Hunt, John (Ravensbourne)
Mudd, David
Stewart, Rt Hon Donald


Hurd, Douglas
Neave, Airey
Stewart, Ian (Hitchin)


Hutchison, Michael Clark
Neubert, Michael
Stokes, John


Irving, Charles (Cheltenham)
Newton, Tony
Stradling Thomas, J.


James, David
Nott, John
Tapsell, Peter


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Onslow, Cranley
Taylor, R. (Croydon NW)


Jessel, Toby
Oppenheim, Mrs Sally
Tebbit, Norman


Johnson Smith, G. (E Grinstead)
Page, John (Harrow West)
Temple-Morris, Peter


Johnston, Russell (Inverness)
Page, Rt Hon R. Graham (Crosby)
Thatcher, Rt Hon Margaret


Jones, Arthur (Daventry)
Page, Richard (Workington)
Thomas, Rt Hon P. (Hendon S)


Jopling, Michael
Paisley, Rev Ian
Thompson, George


Joseph, Rt Hon Sir Keith
Pardoe, John
Thorpe, Rt Hon Jeremy (N Devon)


Kaberry, Sir Donald
Parkinson, Cecil
Townsend, Cyril D.


Kershaw, Anthony
Pattie, Geoffrey
Trotter, Neville


Kimball, Marcus
Penhaligon, David
van Straubenzee, W. R.


King, Evelyn (South Dorset)
Percival, Ian
Vaughan, Dr Gerard


King, Tom (Bridgwater)
Peyton, Rt Hon John
Viggers, Peter


Kitson, Sir Timothy
Pink, R. Bonner
Wainwright, Richard (Colne V)


Knight, Mrs Jill
Prentice, Rt Hon Reg
Wakeham, John


Knox, David
Price, David (Eastleigh)
Walder, David (Clitheroe)


Lamont, Norman
Prior, Rt Hon James
Walker, Rt Hon P. (Worcester)


Langford-Holt, Sir John
Pym, Rt Hon Francis
Wall, Patrick


Latham, Michael (Melton)
Raison, Timothy
Walters, Dennis


Lawrence, Ivan
Rathbone, Tim
Warren, Kenneth


Lawson, Nigel
Rees, Peter (Dover &amp; Deal)
Watt, Hamish


Lester, Jim (Beeston)
Rees-Davies, W. R.
Weatherill, Bernard


Lewis, Kenneth (Rutland)
Reld George
Wells, John


Loveridge, John
Renton, Rt Hon Sir D. (Hunts)
Welsh, Andrew


Luce, Richard
Renton, Tim (Mid-Sussex)
Whitelaw, Rt Hon William


McAdden, Sir Stephen
Rhodes, James R.
Whitney, Raymond (Wycombe)


MacCormick, Iain
Ridley, Hon Nicholas
Wiggin, Jerry


McCrindle, Robert
Ridsdale, Julian
Wilson, Gordon (Dundee E)


Macfarlane, Neil
Rifkind, Malcolm
Winterton, Nicholas


MacGregor, John
Rippon, Rt Hon Geoffrey
Wood, Rt Hon Richard


MacKay, Andrew (Stechford)
Roberts, Wyn (Conway)
Young, Sir G. (Ealing, Acton)


Macmillan, Rt Hon M. (Farnham)
Rodgers, Sir John (Sevenoaks)
Younger, Hon George


McNair-Wilson, M. (Newbury)
Ross, Stephen (Isle of Wight)



McNair-Wilson, P. (New Forest)
Rossi, Hugh (Hornsey)
TELLERS FOR THE NOES:


Madel, David
Royle, Sir Anthony
Mr. Spencer Le Marchant and


Marshall, Michael (Arundel)
Sainsbury, Tim
Mr. Michael Roberts.

Question accordingly negatived.

Sir G. Howe: I beg to move, in accordance with the wish of the Committee, the consequential amendment, in page 10, line 29, to leave out '£7,000' and insert '£8,000'.

Amendment agreed to.

Clause 11, as amended, ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Frank R. White.]

Committee report Progress; to sit again this day.

COMMUNITY SERVICE BY OFFENDERS (SCOTLAND) BILL

Order for Second Reading read.

Motion made, and Question put forthwith pursuant to Standing Order No. 67 (Public Bills relating exclusively to Scotland), That the Bill be committed to a Scottish Standing Committee—[Mr. Frank R. White.]

Question agreed to.

COMMUNITY SERVICE BY OFFENDERS (SCOTLAND) [MONEY]

Queen's Recommendation having been signified—

Resolved,
That, for the purposes of any Act of the present Session to make provision as respects the performance of unpaid work by persons convicted in Scotland, it is expedient to authorise any increase attributable to any provision of the said Act in the sums payable out of money provided by Parliament—

(a) under the Social Work (Scotland) Act 1968 in making grants to local authorities in respect of expenditure incurred by them in providing services for persons subject to community service orders or probation orders which include a requirement that the offender shall perform unpaid work;
(b) by way of rate support grant.—[Mr. Frank R. White.]

Orders of the Day — NATIONAL HEALTH SERVICE (NORTH-WEST REGION)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Frank R. White.]

12.24 p.m.

Mr. Walter Clegg: I am very grateful to be given the opportunity, at this early hour of the morning to be able to discuss some of the problems of the National Health Service in my constituency. I have given the Minister a rough indication of the areas which I shall be covering. I do not expect any off-the-cuff replies. I am merely bringing these matters to his attention.
The first question I should like to discuss with regard to the problems of the National Health Service in the Wyre

District, which is coterminous with my constituency, is the casualty facilities at the Fleetwood Hospital. As the Minister will no doubt know, Fleetwood Hospital is a small hospital, and at the moment casualties are directed to the Victoria Hospital in Blackpool, some nine miles away. Victoria Hospital has much better facilities than Fleetwood Hospital for dealing with casualties.
The people of Fleetwood fear that the lack of facilities at Fleetwood Hospital, even though it be a small one, could lead to danger, and to possible maiming and injuring, because people's needs are not met straight away. The problem is that Fleetwood, quite unlike any other part of the Fylde Coast, is an industrial town. It is both a fishing port and a general cargo port. It is a roll-on, roll-off port which has heavy industries in the shape of ICI. It also has innumerable light industries. These industries give rise to possible accidents at work. I know that some of the firms in the town are perturbed that the basic facilities are as far away as the Victoria Hospital in Blackpool.
The Fleetwood Civic Society has carried out a survey of the problem, and I shall be sending the Minister some of the material which it has provided to me. As well as being an industrial town, Fleetwood is also a holiday resort. We have the problem in the summer of thousands of visitors coming to the town. This is also a problem for the Victoria Hospital in Blackpool, a town which has about 16 million visitors a year. This puts a tremendous strain on the hospital, especially on its casualty service. If facilities were to be given in Fleetwood, that would lighten the load on the Victoria Hospital casualty service.
It is not only firms that have expressed concern about the lack of facilities at Fleetwood Hospital. Concern is also shown by schoolmasters who are worried about their pupils being injured during school time. Concern has also been expressed by landladies as well as visitors to the town. I shall send these facts to the Minister so that he may consider them in due course.
The second general point I wish to raise concerns a remarkable constituent, Mrs. Pat Seed, who suffers from cancer and who about a year ago started out to raise £750,000 for the installation of an


EMI scanner at the Christie Hospital in Manchester. I have an interest in the Christie Hospital, not only because of Mrs. Seed, but because it is the cancer hospital for the North-West area.
When I first met her about a year ago and she told me what he target was, I thought that she was taking on an impossible task. But the response has been quite remarkable, and the fund now stands at about £800,000. This has been achieved without any great organisation and at very low cost. Mrs. Seed has had a tremendous amount of help from ordinary people throughout the North-West area. It is remarkable how spontaneous the reaction has been. I can scarcely open a newspaper in my constituency without reading about some group that has been formed. For example, a small schoolboy made a boat which he will sell and the proceeds will go to the fund. We have also had the help of famous characters from the North-West, such as Ken Dodd and Red Rum. It is, however, quite remarkable that this lady, with all the odds against her, has raised such a vast sum in a short time.
Here I must pay tribute to the Minister of State. When we had a debate on the NHS in the North-West upstairs in Committee, to a certain extent he relaxed the rules about hospitals taking part in fund raising. I must tell the Minister that Mrs. Seed informs me that the relaxation of the rules at the Christie Hospital has helped the fund. Bearing in mind the success of the fund and the help that it has given at a time when funds for the NHS are restricted, I ask the hon. Gentleman to reconsider the rules to ascertain whether they can be further relaxed. There is a need to bridge the gap between public spending limitations and what people are prepared to give. There is no more remarkable example of what can be done than Mrs. Seed's example. People in other parts of the country have taken an example from Mrs. Seed's activities and have started their own funds. That is something from which we can learn and which can benefit the NHS generally.
I turn to a more personal matter that is of concern to my constituents as well as myself, namely, the pacemaker. I have a pacemaker myself. It was first inserted in December 1974. I am now on my third pacemaker. I am told that basically there are two forms of pacemaker that

are being fitted under the NHS. One form of pacemaker is powered by a mercury zinc battery and the other by a lithium battery. The mercury zinc battery is cheaper to insert initially, but the lithium battery has a longer life.
I understand that practice varies from region to region in the NHS. However, I ask the Minister to consider the figures to which I am about to refer, which have been supplied to me, which relate to the long-term effect of using the shorter life battery as against the longer life battery. I am advised that over eight years the cost of installing a mercury zinc battery, taking into account hospital costs and loss of earnings, would be on average £7,196. For the same period the cost of the lithium battery, which would last longer, would be £2,971. That is a saving of about £4,000. That saving arises because over eight years the cheaper battery would have to be replaced three times against once for the dearer battery. The patient would have to undergo three operations for the cheaper battery to be inserted against one for the dearer battery.
I understand that the length of time spent in hospital for the replacement operation is five days. In the long run, the cheaper battery costs more because of increased hospital costs. However, there are other factors, too. I am told that, over four years, the patient has to attend 15 clinics as opposed to five clinics with the dearer battery. Again, there is a saving of hospital time.
Not only the economics of the situation are in question. There is a risk when a general anaesthetic has to be given, especially if the patient suffers from bronchitis or something connected with that. If the number of operations can be reduced, fewer lives are at risk.
There is also the human problem. A patient prefers to know that over eight years he will have to face only one operation as against three. It is much better for the patient to know that he has a long-life battery and that he will not have to keep on coming back.
There is another factor to be considered when taking into account the economics, although it is one that I find bizarre. It is said that there is an argument for inserting a short-term battery when the patient is an older man or older


woman. However, I gather that the long-life battery should be and is recovered from the body in the event of a cremation and that it is used again.
I ask the Minister to give consideration to these matters to ascertain whether the use of the long-life battery would in the end be less costly to the NHS, be of greater benefit to the patient, and cause less anxiety.
Those are the matters that I wanted to raise. I do not expect replies immediately. If the Minister considers the points that I have raised, I shall be grateful.

12.35 a.m.

The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): First of all, Mr. Deputy-Speaker, I should like to say how glad I am that the hon. Member for North Fylde (Mr. Clegg) has taken this opportunity to raise some special problems affecting the National Health Service, both personally and in Wyre, which forms part of the Blackpool health district, which is in the Lancashire health area. I should like to express my personal thanks to the hon. Member for having given me notice of the special points that he wished to raise.
I should like to start with a few basic facts. I think that it is important, because the hon. Gentleman is representing one section out of three in the Blackpool health district.
The population of the Blackpool health district totals about 320,000 people, and is concentrated along the coast, where the major hospitals are situated. The district general hospital is the Victoria Hospital, in Blackpool, and in addition to meeting the needs of the residential population the hospital services have to cope in the summer months with a large influx of holiday visitors and in the winter with conference-goers. The coastal area also attracts a large number of retired people, who have often moved away from their families and may well impose a further strain on the health services.
The Wyre sector—to whose problems the hon. Member has referred—has no major hospital of its own, and therefore looks outside the sector for most hospital services. The hon. Member referred to a feeling among his constituents that a

casualty unit capable of dealing with emergency treatment should be provided at Fleetwood Hospital, a 31-bedded cottage hospital in which general practitioners provide day-to-day medical care.
I am aware that this issue has a long history. In 1974 representatives of the trades council met the Blackpool district management team to discuss the situation at Fleetwood. The trades council representatives at that meeting accepted that it was impracticable to provide a full accident service at Fleetwood Hospital. Then, as now, all major accident cases were referred directly to Victoria Hospital for treatment in the accident department, 10 miles from Fleetwood.
This arrangement of accident and emergency services in Blackpool health district is in accord with the recommendations of the Platt Report on accident and emergency services. The Government's policy on these services is that they should be concentrated to provide a pattern of accident and emergency units staffed and equipped to deal immediately with major injuries and other emergencies at any time of the day or night. The aim is to ensure the availability of all the medical and nursing skills, supporting services, and the equipment needed for expert diagnosis and immediate life-saving treatment for injured patients and other emergency cases.
It is not possible for every hospital to be staffed and equipped to the necessary high standard to deal with emergency cases. Concentration of services is therefore in the best interests of patients with serious injuries or other emergency conditions. It also benefits such patients to be taken direct to a major department where the necessary skills are available, even though this may involve a longer ambulance journey, rather than being taken to a hospital which does not have those facilities and then being transferred elsewhere. Health authorities have to balance ease of local access against the advantages of concentrating resources in a fully staffed and equipped unit which can cope with any emergency. If, through dispersing these resources, a less effective service was provided, it could be that lives would be lost.
It is true that if a patient presents himself at a hospital which is not providing


an accident and emergency service, health authorities have been advised that essential first aid should be given by the staff available. In such circumstances it is in general unlikely that medical staff or experienced nurses will be available to deal effectively with patients attending casualty, particularly out of normal working hours. Therefore, it may fall to other members of the staff to advise these patients on the whereabouts of the nearest accident and emergency department and of the alternative possibility of contacting a general practitioner.
When immediate first aid can be provided this will usually be no more than can be given by a lay person with first aid training—in other words, placing unconscious patients in a position in which they can breathe freely, or bandaging wounds.
This brings me to the second part of the district's problems, which has a bearing on the hon. Gentleman's first point. It is not only the influx of visitors in the summer who place a strain on the health services, but the high percentage of elderly people living in the district. This section of the population tends to make increased demands on the district general hospital in the winter months so that it is working at full stretch throughout the year.
In the Blackpool health district 21 per cent. of the residents are aged over 65 as against a national figure of 16 per cent. The figure for Wyre alone is 19 per cent. For the health district as a whole it is estimated that the proportion of people aged over 65 will have increased to 29 per cent. by the 1980s. The Blackpool Victoria Hospital already provides 60 geriatric assessment beds, and I am told that there are plans—admittedly at a very early stage—to provide a further 144 geriatric beds at the hospital by the end of the 1980s. The health district also has 112 beds for the elderly at Rossall Hospital, Kirkham—in the Fylde sector—and 315 beds at Wesham Park Hospital near Fleetwood—in the Wyre sector. There are schemes in the capital programme to provide 48 beds and associated day places by 1981 at South Shore Hospital in Blackpool, a further 48 beds at a new community hospital in Poulton-le-Fylde and 96 beds at Devonshire Road Hospital, Blackpool. This is, I think, an encouraging picture and there

will be benefits for all the parts of the health district, including Wyre. I might also add that the regional health authority's capital programme includes a proposal to build a unit for the elderly severely mentally infirm at Fleetwood Hospital. This will provide 56 beds and 50 day places. The authority hopes that building will start in 1979–80.
The North-Western region, of which Blackpool health district and the Wyre sector are part, is recognised to be a needy region. This Government are the first to have recognised this and have started to put this right. The revenue growth rate for the region in 1977–78 was 3·2 per cent. and in 1978–79 it is 4 per cent. The regional health authority has worked out the extent of deprivation in its areas according to the principles defined by the Resource Allocation Working Party. Lancashire has been identified as one of the needier areas and the Blackpool district is also one that is relatively deprived. In practical terms, this means that the health district has received an above average rate of growth in its revenue allocations. I know it will be some time before anyone can say that the health service available to the people living in the Blackpool health district is all it could be, but progress is being made. The North-West Region is not ignored by Whitehall and Westminster. Our policy is designed to come to its relief, and we shall do our utmost, so long as we have power, to keep faith with the people in the North-West, including the hon. Gentleman's constituents.
I should like at this point to return to the problem mentioned earlier—that is, the influx of holiday visitors in the Blackpool health district each year. I understand that a survey carried out by the British Market Research Bureau for the Blackpool Corporation and the English Tourist Board in 1972 estimated that about 3 million visitors stayed in Blackpool each year. I do not have figures for coastal districts in Wyre, but holiday visitors there would, when ill, go to the Victoria Hospital in Blackpool.
While this tourist industry is no doubt beneficial to many of the people living in the district, it presents problems to those responsible for planning and managing the health services, particularly the hospitals. I understand that the regional health authority, in calculating both the


funds which are distributed on a population basis to the AHAs and then to districts and in deciding what population figure to use for planning purposes, makes allowance for the fact that so many people holiday in the Blackpool health district. There is no doubt, however, that the great number of holidaymakers places a burden on the health services. The problem inevitably centres on the acute hospital services. When people fall sick on holiday, that is where they go. It is nearly always an emergency.
The district management team has carried out research which reveals that between June and September one in four of the people attending the Victoria Hospital's accident and emergency department are visitors. One in six of those admitted as emergency in-patients between June and September were also visitors, and extra beds are put up to cope.
The health authorities have identified this problem and have given priority to the need to develop the Victoria Hospital, Blackpool. The regional health authority is proposing in phase IV of the development of this hospital—which is in the capital programme to start in 1982–83—to provide more acute beds, intensive care units and more theatres. There are also plans for a possible phase V towards the end of the 1980s, and this will include more acute beds and more theatres as well as a geriatric unit and rehabilitation unit.
I turn now to the second matter that was raised. The hon. Gentleman has rightly praised the courageous efforts of Mrs. Pat Seed and the appeal fund Committee in raising money for an EMI body scanner at the Christie Hospital, Manchester. I have unqualified admiration for the success which Mrs. Seed and her appeal fund committee have achieved. This equipment is, I understand, still at an early stage of development as a clinical tool. It is not yet clear what difference detection of cancer by one of these highly sophisticated machines makes to patient management and recovery compared with detection by other cheaper and readily available diagnostic scanning procedures.
A number of hospitals and medical education establishments are at the moment carrying out research in the

hope that the clinical role of body scanning will be more clearly established. The hon. Gentleman may not know that there is already a body scanner at the Manchester University Medical School which is partly funded by the North-Western Regional Health Authority and which provides a service for some patients from the Christie Hospital.
We all know that health authorities have to make difficult choices in setting priorities for spending the funds available to them—and these are necessarily limited. These body scanners are very expensive, not only to buy—they cost about £400,000—but also to run. Current estimates suggest that running costs covering medical, technical, nursing and other staffing needs, consumable items, servicing contracts and so on can come to over £50,000 a year.
I know that both the North-Western Regional Health Authority and the Manchester Area Health Authority (Teaching)—the area responsible for the Christie Hospital—have a great deal of admiration for Mrs. Seed and her efforts. But in accepting the gift from the fund they have had to stipulate—I am sure that it was done with reluctance—that the capital and running costs should be met from private funds.
There is in this country a well-established tradition of co-operation between the statutory authorities and voluntary initiatives, and these bodies often supplement the services provided by statutory authorities such as the NHS. I think that this sort of initiative is very valuable to the NHS as a whole and to the local communities. In this connection, I shall look at the point made by the hon. Gentleman and write to him in due course.
I now turn to the subject of pacemakers, on which the hon. Gentleman asked about our policy. Two types of pacemaker, as he said, are at present supplied by the National Health Service. The difference between them is the type of battery; one is lithium battery powered and the other is mercury battery powered. Mercury batteries are considerably cheaper than lithium ones. A mercury battery powered pacemaker costs £380, while a lithium battery powered pacemaker costs about £700. It is true to say however, that in the long run the lithium battery powered pacemaker may be cheaper, since the life


expectancy of a mercury battery is two to three years, while a lithium battery is believed to last between five and 10 years.
There is no central policy saying which type of battery should be preferred, although I understand that there is often a clinicial preference for the lithium battery powered pacemaker, very properly, for the reasons the hon. Gentleman outlined. But it is a matter for health authorities to decide, in the light of their available resources.
I shall conclude with one further comment which may help the hon. Gentle-

man. Hopes have been placed upon the isotope powered pacemaker, which would have a much longer life span than either the lithium battery or the mercury battery. The isotope powered pacemaker is still at a very early stage of development in this country, and its effectiveness is still being evaluated. It would, however, undoubtedly be considerably more expensive than the two existing types of pacemaker, which is obviously a consideration to be taken into account.

Question put and agreed to.

Adjourned accordingly at thirteen minutes to One o'clock.